You have probably heard the news about the housing slump, and the “buyer’s market” that we are currently experiencing. A buyer’s market occurs when supply and demand factors shift to cause a drop in price. Due to the increased supply of homes from excess building and foreclosures, with demand remaining constant, prices of homes drop. The Champaign-Urbana market does not experience the large fluctuations that other areas do, but it is not completely immune. This buyer’s market is a great time to buy. Although this seems to be bad news if you are wanting to sell, it is really not bad news if you have been thinking about purchasing a larger home.
Let me explain: No matter the type of market, money lost while selling is typically regained when buying. Most first-time homebuyers will eventually upgrade to a larger, more expensive home. Even if you do not get as much as you would like when you sell, you will likely save a similar percentage when you upgrade. This buyer’s market is, thus, a “Trading Up” market!
Example: Let’s say you bought your house 3 years ago, and home prices have dropped by 5% since then, here’s what it could look like if you decided to trade up now:
Your home: Home Price 3 years ago = $150,000.
Sell now at $142,500 = $7,500 Loss
Your larger home: Home Price 3 years ago = $250,000.
Buy now at $237,500 = $12,500 Savings
The smaller loss at sale will be compensated by greater savings at purchase, resulting in a significant net gain.
Another bonus to trading up during a buyer’s market is the benefit of being in a larger home when the market rebounds. Using the above example, if home values appreciate by 10%, the larger home would go up in value by $25,000 while the smaller home would only grow by $15,000. This choice would increase your net worth and would allow you to take advantage of this market. On average, over 60% of a person’s net worth is in their home. This is the time to increase your wealth!
If you have considered upgrading to a larger home but have been negatively influenced by the media or by other factors, let me help you sell your home and find your next one. My goal is to sell your home in the shortest time and for the most money, and to help you get a great value when you buy. If you have any questions about the local real estate market, do not hesitate to ask me.