In a word (or two), “it depends.” Obviously, conventional wisdom says that you don’t want to sell when prices are at their bottom. So, in general, if you don’t have to sell right now, you might want to think about staying put.
There are, however, a couple of caveats to that. First of all, what do you do if you’re selling in order to buy a new place here in town? You want to get in on the great deals inherent in a buyer’s market. But you have to sell to make that happen.
Obviously, the best case scenario would be if you didn’t have to sell to make that happen. Renting your current property might be an option. That way, you can wait until the market turns around to sell it. Plus, during the interim time, you’ll have someone else making payments and contributing to the equity on the property. There are disadvantages, however. First and foremost, you have to be (or hire) a landlord. Second, you wouldn’t have the proceeds from the sale of that home available as a down payment on your new home. You could borrow against the equity you already have to make your down payment, but that would increase the amount of rent you would need to cover the mortgage payment. And finally, you would need to be financially stable enough to cover that mortgage payment yourself on any months that the property remained vacant.
So let’s assume that renting isn’t an option. Well, then the question remains – is the loss you’d take on your current home made up for by the gain on the new house you’d be acquiring?
That all depends on where it is and what’s been happening in that neighborhood.
The trick is to look up the sales for houses like yours, in your area, for the past few years. (I know you can’t do that. But I can.) See if prices have dropped, remained stable or increased. Trust me – there are plenty of parts of town where values are still rising. Given those figures, can you sell the home for enough money to cover your mortgage and closing costs? Would you have enough left over for whatever down payment money you need?
And then look at where you want to move. What are housing prices doing in that part of town? Flat? Dropping or rising?
If you’re moving from a flat neighborhood to another flat neighborhood, it’s probably a wash – especially if the homes are in a similar price range. The same is true if both are depreciating or appreciating at roughly the same rate. This might not be a good time to move from a depressed neighborhood into an appreciating one, unless you’re afraid that your current home will continue to drop in value, and you want to cut your losses and jump onto the uphill train.
And finally there are the cases of sellers who have to sell. They’re being transferred, moving out of state, need to get out from under the mortgage – whatever. All is not necessarily lost in a case like that. But it’s a big enough topic that it deserves its own entry.
Which I’ll do tomorrow