In my work as a Realtor in the downtown neighborhoods of Boston, I often speak with clients who are wondering whether to sell their current home and buy a new one this year or next. If you’re like most people who own a home, the next home you buy will be a step up from your current one. Generally, you’re moving from the one bedroom or studio you are currently living in to the two bedroom with your partner, and then to the three-4 bedroom penthouse in the city or the equivalent single family home in the suburbs.
Many of my clients wonder whether they should do the step-up now, or wait a year. We are currently in a very healthy market. Why not wait a year for your current home to appreciate?
Here’s why not. We don’t really know what the market will do in the next year. We never do, and we’re always surprised. Hey, if Ben Bernanke can be surprised, so can I. But let’s say that the market across the board will increase an average of 5% in the next year. The market in Boston does not necessarily appreciate the same amount for every home, but it actually does not vary that widely here in the downtown areas.
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So, let’s say that the current market value of your 700 SF one bedroom home is $500,000, and we see that 5% increase. The good news is that by next year your home would be worth $525,000! Cool, yes?
Ah. But wait.That $1,000,000 renovated 2 bed duplex you’re thinking of stepping up to will also have appreciated 5% more or less, meaning it will be worth $1,050,000. Between this year and last year, you may have gained $25,000 but you will also have lost $50,000, and therefore that transaction will cost you $25,000 more than it would this year. So yes, price appreciation is something we all like, but there are two sides to every coin.
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“The Cost of a Home: Last Year, This Year & Next Year,” a recently published blog post by the KCM Crew, points out that the cost of a home is determined mainly by price and mortgage rate. The KCM Blog article illustrates, assuming a 20% down payment combined with rising interest rates, what your monthly payments would have been had you purchased a median-priced home last year, and then compares it to what they’d be if you purchase the same home this year. It goes a step further to see what you’d pay monthly if you waited until next year to purchase.
If you are waiting to buy your next home, you may want to consider whether your reasons are financial or otherwise. Read the KCM Blog article.
More info about buying a home in Boston.
More info about selling a home in Boston.
If you would like to know more about the Boston real estate market, please call me at 617-584-9790 or email me at jwolvek@bostonrealtyweb.com.