Monday, July 10, 2006
A declining market can be an excellent time to make a move up to a higher priced home. In this example as shown on the graph at the right, the owners of Home 'A' have experienced a 10% decline in value. By itself, this seems like a negative outcome.
Had the owners of home 'A' sold at the peak of the market, they would have also purchased Home 'B' at the peak of the market. The difference would have been $80,000. When the tide of the market goes down, the prices of all homes go with it.
Home 'B' also experienced a decline, but by a greater amount. The difference is now only $72,000. By taking the 'loss' in the sale of Home 'A', they realize a net gain of $8,000 in the overall transaction.
Everyone seems to have specific ideas on when the right time is to sell. Some base their theories on the overall economy, while others will tell you that there are key buying months that you'll want to capitalize on.
If you're not buying and selling strategically or for investment, the best time to sell is really when you feel your existing home will not meet your future needs. The best reason to purchase a new home is to take advantage of your family and lifestyle changes. Do you wish to be closer to a school? Are you switching jobs? Do you have an aging parent to care for?
In Canada, weather and holidays do play a factor. Almost no one goes house hunting around Christmas, and few give up their summer vacations. Of course, those with school-aged children are less likely to move during the school year and summer is an ideal time. In some areas, there is a definite "spring cycle" -- perhaps it's a bit of spring fever and a wish to break out of the bonds of winter.
Some gamblers look for winter bargains and then try to sell their homes during the spring cycle. But overall, that could be more tension and aggravation than you wish. And the monetary results may be disappointing.
Another key factor to consider is the economy. Are interest rates higher or lower in comparison to your current mortgage? If they are higher, you may want to stick with your current home, as your new mortgage payments could be uncomfortable. If rates are lower, you might be able to trade up to a more expensive home without a significant increase in your monthly mortgage obligation.
What's more, if it's a buyers' market, you may be in a strong position to purchase a new home, especially if you have accumulated some equity in your current property.
You may wish to buy when the market is seasonally 'soft' early July or December, see seasonal trends here
For more information please contact A. Mark Argentino
A. Mark Argentino Associate Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc.
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1