Is it Time to Move-up and Buy a Larger Home?

Move-up buying, is it time to sell and buy a larger home?

Move-up buying, is it time to sell and buy a larger home?

Move-up Buying

Virtually dead during the recession, move-up buying has resurfaced again in San Diego County. Property owners have been emboldened by rising home prices to list their homes and re-enter the market themselves.  Rising home values have meant more borrowers have emerged from negative equity, giving them the chance to break even or make a profit when selling.

San Diego County sales in the $300,000 to $800,000 range, generally the move-up category, rose nearly 50 percent in July 2013 compared with a year ago, figures from real estate tracker DataQuick show. Sales in the entry-level market, below $300,000, fell 25 percent in July, compared with a year ago.

Remaining home inventory also provides clues of a more-vibrant move-up market. The number of homes on the market between $500,000 and $800,000 is at a four months’ supply, which is “very, very healthy” compared with a year ago, when it was six to eight months. Movement in the trade-up market because those sellers tend to pay more visits to home-improvement stores to get furnishings and appliances.

Move-up buying has historically been a tricky process. Should homeowners sell first? Or should they buy first? The juggling act can get increasingly frustrating in the current market, where housing supply remains limited and unexpected blips in mortgage rates could doom deals. Making sure the math makes sense is probably the first step in deciding if moving up is the right choice.


Determine the Home’s Value

Figuring out whether the juggling act is worth it generally starts with finding the value of the home you plan to sell.

For some homeowners, recent home-price increases may mean they’re no longer underwater on their mortgages. That means they may be able to sell their homes for a profit or break even, which will help determine how much home you can afford.

A review of how much you make and how much money you owe also is key. Borrowers generally will need less than a 45 percent debt-to-income ratio to qualify for a fixed-rate mortgage, said JC Agajanian, a San Diego Realtor who has recently worked with move-up buyers and has a mortgage background.

The buying or selling question depends on your financial position. Some people may need to sell first because they would need those proceeds for the down payment of the future home. In the past, move-up buyers could get some flexibility with contingencies, where they would agree to buy on condition they are able to sell their own homes.

But contingencies have largely disappeared amid an increasingly competitive real estate market that may give sellers more ready-to-go buyers.

“In the climate we’re in, because things are absolutely feverish, sellers don’t have to subject themselves to locking up a contract and wait for a buyer to sell their property,” Agajanian said.

Buying and Holding

Not all move-up buyers shed their starter homes. In some cases, they’re held as rental properties. Before deciding on this path, sellers should see if their lenders will count future rental income as income when calculating the mortgage. Holding multiple real estate mortgages in your personal name could throw your dept to income ratio out of whack if you are not careful.  Some savvy investors will move their properties being held into an LLC or some form of entity rather than keeping the property on their personal financial statement.

Reprinted from U~T San Diego, August 24, 2013

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One Response to “Is it Time to Move-up and Buy a Larger Home?”

  1. Home Sales Soften in August / September - North County Property Group Says:

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