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How do you know you are truly ready to sell and buy another home? Is it that you have the downpayment, or something is bothering you about your neighborhood, or just ready to move up, etc. Do most people raise enough cash for a 20% downpayment?
It is not a passage of life to buy another house. What is your goal?
It's best if you can look at the question as a business question. Would it be a good financial move? Would you make money on your current home? How much will you sell it for and what will you spend to get it ready to sell.
Why do you need another house? Do you need more space? Do you want more space? Are you unhappy in your current neighborhood? Do you feel your neigborhood is declining or do you think it's doing well?
When you are busting at the seams in your current home.
When your current residence is too big and/or too much maintenance for your current needs.
When you want a different neighborhood.
When you want a new(er) house.
When you want an old (er) house.
When your current house is "done" and you want another project.
When you want a lifestyle change.
When your income increases sufficiciently making a larger house more affordable.
When your income decreases, making a smaller home, a necessity.
When you have enough equity in your current home to " trade up".
When you need to move due to a job transfer or new job.
When you want a better school district for your children.
When schools districts no longer matter.
When you want a better location.
When you fall in love with another house.
When you hate your current house.
Parts of California, the NY tri-state area, Florida, Arizona and other places are no strangers to balloon/bust real estate cycles. Yet, a foreclosure tsunami did not occur, as is too common in many places, now.
The difference is that in times past, people has skin in the game. They were willing to do whatever it took to keep their homes and most of them did.
Sounds like the OP is thinking in terms of down payment, and there is nothing wrong with that. I would argue that over the period from about 2002-2007 huge portions of the real estate market experienced unusually easy appreciation and for many people they were able to easily make enough in 'unimproved automatic appreciation' to move up.
That has not been the case for folks that bought in markets that have declined, however for those that "bought smart" and made the kind of improvements that appeal to buyers, at the right price, there is still a good chance that one can "move up" without having to do amass too burdensome a pile of cash.
The impetus created by the new buyers tax credit has helped to support the entry level market and eventually that should help stabilize / stimulate move up buyers too. For now, if your existing home would be appealing to entry buyers the window to capture those buyers that want to use the first time buyers credit is rapidly shrinking. With the administration's efforts focused on pushing legislation that would make changes to health care I do not know what the future holds ...
Mainly the interest rates are nudging at me. We don't want to refinance because we see ourselves moving within the next year. Who knows what the interest rates will be an a year...am I right? Anyway, yes our home is a starter and will really appeal to new home buyers (it looks like a cottage straight out of pottery barn)...and there are only 7 other homes in my town at this price range, so not much competition. I guess if we are to take the plunge it should be sooner rather than later. Only if I had a crystal ball...ha ha. The interest rates are just appealing to me right now. I know the fed said rates will remain low through the first quarter of 2010...then what?
The FRB does NOT set mortgage rates, though their actions have a very large impact on interest rates. It is very unlikely that there will be sudden shifts away from the rates we are currently seeing for a "sustained period" to borrow a phrase from Fed. How long that sustained period will last is not at all clear, as some folks think it may last all the way through President Obama's campaign for 2012, while other feel that things will get fuzzy much sooner.
Without knowing if seven houses is a whole lot, as it might be in a town that has just few hundred homes, or a tiny amount, as it might in an area with tens of thousands of homes, I can't really say how "hot" your home might be. Certainly it would be a good idea to talk with local real estate agents who could give you details about average time on market, which ought to give you insight into how likely it might be to find a buyer soon enough that will be able to take advantage of the current tax credits.
In a case where you are looking to "move up" I think it is smart to shop both the competition that your current home will be up against AS WELL AS the homes that you might be able to afford -- if it looks like the inventory of what you'd have to choose from is getting tight you may have to temper your plans, OTOH, if the inventory is swelling in the target where you want to move you might get a bargain. If you have to make a decision to take an offer on the low side it is completely understandable that you will decide to accept or decline based on what you will be able move to. Now there are real estate agents and appraisers that will poo-poo that idea, but I can tell you it is a very real factor and even when there is no 'contingent contract' the whole chain of events that has to happen for folks to move-up is a big reason that slow downs happen and prices suffer. Even the speed with which lenders turn around loans has a very real impact on overall price trends. The more time the lender spends diddling around the greater the risk of buyers (or sellers) getting cold feet and the deals dying. I don't advocate for anyone to be rushed into any sale, but when the process goes smoothly and quickly everyone tends to benefit...
How do you know you are truly ready to sell and buy another home? Is it that you have the downpayment, or something is bothering you about your neighborhood, or just ready to move up, etc. Do most people raise enough cash for a 20% downpayment?
That's a good question. I think people decide to move on when a life changing event occurs. I guess some people wake up one morning and decide they want to move on. I do not think 20% is necessary but I'm sure people will disagree with me. I would rather put 5 to 10 percent down and put the rest in the bank as a cushion.
How do you know you are truly ready to sell and buy another home? Is it that you have the downpayment, or something is bothering you about your neighborhood, or just ready to move up, etc. Do most people raise enough cash for a 20% downpayment?
You're ready to move up when you believe that the move will make your life better than it currently is. It's an emotional decision, but it must be validated by financial a reality check. If it's a green light on both counts, you're ready.
I sold my home in 2008, sold half my belongings, and been renting while looking. This gives me the advantage of making a 'clean offer'. A clean offer is attractive to the seller, but it also has simplified the buying process for me. I look, decide, and make an offer. No worries and no pressures. When I do find the home I'll spend the majority of my life in, I can easily opt-out or negociate the remainder of my lease. Then I'll move the few belongings I own and furnish the house to fit its' design, and my new lifestyle.
If there is a drawback, it's wanting to have a home (emotional) versus being patient enough to wait for the right home, right price, and right time (practical). As time passes, I feel more compelled to compromise because renting feels a little like my life is on hold.
The advantage is in saving money to purchase. Renting is still cheaper than owning, and with increasing savings, I'm in the enviable position to continually move up my home selection.
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