As the market shifts, there are benefits and strategies to keep in mind. A down market has opportunities, especially for trading up. Though Sellers may sell their existing home for less, the savings on a larger home purchase will offset any loss on the sale of their current home. For example, if home prices drop by 5%, the smaller loss that occurs at the initial sale will be compensated by greater savings at the subsequent higher purchase, resulting in a net gain, as demonstrated in the example below:
- Home Price = $900,000
Sell at $855,000 = $45,000 loss
- New Home Price = $1,100,000
Buy at $1,045,000 = $10,000 savings
Oahu Real Estate
The example above demonstrates that a 5% drop in home prices results in a $10,000 savings on a trade-up to a more expensive home. Additionally, when the market rebounds, the more expensive property will go up more in value. This kind of trade-up is the strategy that savvy investors employ. When you buy a larger and better home in a buyer’s market, you are saving more on the purchase and are in a better position when the market rebounds!