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The Perfect Time To Upgrade To Your Move-Up Home Is Coming

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If you want to upgrade your home, get excited! Now is the perfect time to upgrade to your moving home.

The luck of moving home buyers is truly incredible. While housing supply remains relatively stable (still well below pre-pandemic levels), demand for housing has declined since the end of the first quarter of 2022 as mortgage rates rose by about 2%. I’m here.

Those with strong cash flow and large cash balances should appreciate this economic environment. Not only is the Federal Reserve helping to make better homes more affordable, it’s earning a higher return on risk-free cash.

desire for a better home

As a parent of two young children, I am actively trying to save more money to live in the nicest house possible. After all, The best time to own the best home you can afford It’s when your heart rate at home is at its highest.

It’s unlikely that you’ll buy a bigger house once your kids go to college. It will feel wasteful, lonely, and illogical. Rather, you’ll probably either leave the house as it is or scale it down. A beachfront condo would be nice.

In 2020, when I purchased my current home, I climbed the home upgrade ladder.that is Ideal floor plan for work from parents with childrenHaving an office is huge. There is also room for an au pair.

But two years on, we’re seeing more home deals in the higher price brackets. I said I bought a forever home, and as a real estate fanatic, I’m always looking.

It took a nationwide lockdown for me to buy a moving house. That was scary at the time. However, you will soon be able to buy a moving house as there will be no more bidding wars.

best time to upgrade your home

The best time to upgrade your home is in the second or third year of a property decline cycle. Historically, real estate fluctuates in 7 to 10 year up cycles and 1 to 3 year down cycles.

The risk of buying after just one year of price decline is that the price could fall another year or two. Also, the risk he buys three years after the peak is that he may miss the bottom.

As you can see, it’s hard to know when real estate cycle peaks and troughs will occur until about six months after they occur. Therefore, the best time to upgrade your home is approx. 18 months after peakBasically, recognize when your peak was (it takes 6 months to really know) and wait 12 months.

We now know that around March 2022 was the most recent peak in home prices. Median home prices across the country may continue to rise year-over-year in 2022. But with the Fed aggressively raising rates, prices have fallen significantly and faster than expected last year. Demand will pick up again only if the Federal Reserve does not relent by the end of the year.

if you Bought a house at the top of the cycle, not all is lost. You just have to come to terms with your actions and enjoy your home for as long as possible, if you can put up with it for 5-10 years you’ll be fine. After all, if prices fall for three years at worst, he will need at least three years to recover. But I don’t think the price will go down for that long.

Based on the framework above, when is the best time to upgrade your home? From June 2023 to February 2024Summer and winter are the slowest months of the year. best time to buy a house.

People travel during the summer. Homebuyers typically want to decide where to live before school starts. During the winter, people may also travel and vacation with their families. Sellers who list in July, August, December, and January tend to be more ambitious.

Higher-priced homes fall more in absolute dollars

During a property decline cycle, expensive homes typically fall further in absolute dollar terms. Some luxury homes are likely to fall even more in percentage terms than the median home decline.

In times of distress, No one needs to own a vacation property Or a house with more than two bedrooms. Therefore, they tend to fall the most because they flood the market first.

As an upgrade buyer with strong cash flow, I’m excited to see more high-end homes on sale. Even if the value of your home is declining, you still make a relative profit. Below is an example.

US total residential housing inventory

Upgrading while the home price equalization rate is declining

Suppose you live in a $500,000 house and want to upgrade to a $1,000,000 house. Properties in your city will decrease by 10% from here. As a result, the $500,000 house depreciates to $450,000 and the upgraded house depreciates from $1,000,000 to $900,000.

Thanks to the equal rate of home price decline, we saved $50,000, or a net 5%, off the purchase price of our upgraded home. Banzai! For a 20% down payment, you only need to come up with a $180,000 down payment for a $200,000 down payment.

Not only will your moving costs be lower, but your property tax will be 10% less than the original price. For long-term homeowners, a permanently lower appropriate tax rate is very valuable.

Single Family Home Inventory Active Forecast

Upgrades when better homes decrease at a greater rate

In a scenario where expensive homes fall below home prices, you really like the situation.

Seeing $5.8 million homes listed this summer, real estate FOMOAfter three months, we finally lowered the price to $5,500,000. After a month of inactivity, the seller has withdrawn the listing.

If a buyer makes an offer of $5,100,000, I am confident. Unfunded contingencies Today the seller will accept. If the deal goes through, the price he drops 12%.

It can be argued whether this house was priced too high at $5,800,000 to begin with. But if it had gone public in March 2022, it would have been $5,800,000.

Now suppose you own a house in San Francisco with an average price of $1,800,000. At one point the median was $1,900,000. So you’ve lost $100,000 either due to real price declines or seasonality.

Thankfully, your company went public 10 months ago and sold a lot of its shares. You have $3,000,000 in cash from his current residence and $600,000 in equity in his home. With an annual household income of $800,000, you’re thinking about upgrading!

You’re thrilled with the housing downturn as the home you want to buy has dropped $700,000 in price. On the other hand, you only lost $100,000 in primary, but your net profit is $600,000.

But given that you want to do increase passive income, does not create financial waste by selling the main residence. Instead, he rents for over $6,000 a month after buying an upgraded home.

Upgrades when cheap homes decrease at a greater rate

Sadly, it’s also possible that your cheaper home will decline by a greater percentage than your desired moving home. It may be in progress.

For example, a $450,000 house drops 20% to $360,000. It was a spec house in the neighborhood about an hour from the city center. In boom times, builders overbuilt.

Even if you’re tired of big price drops, even if your prime $1 million upgrade home is only down 10%, you’re still winning by $10,000. Of course, property taxes and insurance premiums will also be lower compared to prices before the fall.

Confidence in job security or cash flow is needed to make this big leap in a very difficult economic environment. because even though you are saving big luxury house Purchase prices, mortgages, property taxes, insurance, and maintenance costs are all higher.

Single-family home price cuts 2022 history

Embrace the recession!

My risk assets have lost value this year, but passive income has not.Instead, my passive income actually increased Strong private real estate distribution New tenant in my main rental property. After completing the downstairs remodel, my rental home will be rented out for $1,350 per month. In addition, rents are rising in central areas, where most of the rental housing is located. fund-raising funds invest.

For a while, I was dumbfounded and pondered whether I would buy a better home just two years after our purchase. eternal homeTo do so, I would have had to sell a number of properties and stretch like crazy to buy this better home. was interesting.

But after four months, the desire for a better home wore off. Every month the better homes that I have my eye on are getting a little cheaper. It should take.

Aggressively amass as much cash as you can while you wait for the price of your upgrade home to drop further. It’s nice to have a new reason to save again. It also makes you feel better to live in your home for at least three years instead of just two.

If you’re looking for a place to store your cash, personal capital cash is a high-yield cash account, yielding 2.02% APY for non-clients and 2.15% APY for clients. There is no minimum balance. A higher savings rate is one of the direct benefits of the Fed raising the Fed Funds rate.

Thanks to the excessive Fed

For trade-up buyers, the Fed is doing us a favor by aggressively raising interest rates toward a slowdown.if i read How Wealthy Central Bankers Think If right, we expect luxury real estate prices to fall by at least 10% by mid-2023. Median home prices across the country could fall 5% in 2023 after he posted a single-digit gain in 2022.

And if the Fed somehow eases its aggressive rate hikes by the end of the year, our investment Value is likely to start rising againIf so, you should have about three months to buy an upgraded home at a discounted price due to the slow property market.

You may pay higher mortgage interest rates.But at least you’ll get a nice discount on the purchase price to upgrade your home. Refinance to 7/1 or 10/1 ARM You can save even more.

Relentless Fed is mine by the end of the year main risk Wait until summer 2023 to buy. If you can buy it at a price that is 10% cheaper than the March 2022 price, I think you’ll be fine.

make more cash

The hallmark of personal finance enthusiasts is that we are forward-thinking. Instead of spending money like an ignorant lunatic when heading into the storm, we are increasing our savings rate.

Therefore, if the economic violence wrought by the Federal Reserve (Fed) is unrelenting, it will not only be better able to withstand, but it will also be able to easily withstand higher inflation.

Americans are increasing their spending much faster than their incomes are increasing

The average person is in a pinch, partly because they don’t spend enough time on their personal finances, so we pounce and seize the opportunity. is also the case.

Dear readers, are you excited to upgrade your home in this current economic cycle? And are you giving other people the opportunity to take advantage of it? When do you think is the best time to buy a moving house?

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