The Move-Up Buyer, What a Difference a Year Can Make! According to KCM and Case Shiller: New reports are revealing that the number of existing home owners purchasing a house is beginning to increase. Some are moving up, some are downsizing and others are making a lateral move.
Another study shows that over 75% of these buyers will, in fact, be in that first category: a move-up buyer. These can often be the most tricky of deal, from personal experience, as a these buyers are also sellers and we all know an ideal scenario is to have a same-day closing (which we can talk about later).
There is no way for us to predict the future, as I always advise my clients, but I do suggest for them to look at what we do know and in this case we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.
Assume they had a home worth $300,000 and were looking at a home for $400,000 (putting 10% down they would get a mortgage of $360,000). By waiting, their house appreciated by 12% over the last year (national average based on the Case Shiller Pricing Index). Their $300,000 home would now be worth $336,000. But, the $400,000 home would now be worth $448,000 (requiring a mortgage of $403,200).
So, in addition to having to pay more, rates have climbed one full percentage point and this will cost this potential home buyer an extra $426 per month. Here is a table showing what additional monthly cost would be incurred by waiting:
And for those of us who like to know more, the Case Shiller graph of percentage change in national home pricing is pictured below
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