When is the best time to "trade up" on your house?

**jIM_Ohio** · 03-07-2008, 04:54 AM

I would buy a house based on need, not as an investment.

If you trade up- do you need more space? For how long? Why?

For example- wife and I had my condo which I bought before we were married (but we were living together at the time). We upgraded to house we are in now 5 years later.

went from 2 BR/4 BA 1800 sq ft condo to 4 BR/2.5 BA 3400 sq ft home. We traded up because we wanted to start a family and the condo was not good for kids (had space, but 600 sq ft was a finished basement- kids could not be seen by parents in that basement for example). If all 1800 sq ft was on one or two floors, we might still live there now.

So we doubled the size of our house. We upgraded to point where we know we will never move again until retirement (or job transfer). Saves us on closing costs, moving costs and similar. So price and payment close to doubled for us. We could afford it without issue (debt was paid off and 401ks/IRAs are still funded).

My comment would be buy what you can afford, buy what you need (and maybe a little more) so you do not incur the 20k or so it costs to close and move into another house. A person is better to take that 20k and buy 20k more house than they are to upgrade house every 7-10 years.

**jc3900** · 03-07-2008, 05:17 AM

Well mathematically speaking it makes more sense to trade up during a buyers market. Say you have two houses one worth 100$ and the other worth 200$. Lets also say that the market drops 10%. If you own the 100 dollar house, you would sell it for 90$ and buy the other house for 180$. On the other hand if you were in a sellers market and the housing market went up 10 percent then you would sell your house for 110$ and buy the new house for 220. In the hypothetical down market you only go 90 dollars in debt, but in the sellers market you go 110$ in debt. But, like jim said, it is more of a need than investment.

**sweeps** · 03-07-2008, 05:39 AM

It's time to trade up when you have the need and the means. Be sure to factor in increased costs across the board:
Higher mortgage payment
Higher property taxes
Higher insurance costs
Higher maintenance costs
Higher utility costs
Additional furniture/artwork/tchachkes needed
Transaction costs (realtor fee, staging expenses, moving expenses, title transfer taxes, closing costs, etc.)
Hidden "rich man" costs (friends and family think you're loaded so they expect you to pay more and get less for gifts)

I'm not trying to dissuade you from upgrading -- just make sure you haven't underestimated all the costs involved before pulling the trigger.

**Merch** · 03-07-2008, 06:07 AM

Also , house ranges are not perfectly correlated. A lot of people buying $1 million dollar houses (not near NYC) borrow less money. These house tend not to drop as quickly in price.

**jimmyengland** · 03-07-2008, 06:55 AM

I totally agree with jc3900, a buyers market is always going to be your best bet. Now in my opinion is a great time to move with interest rates dropping and plenty of people desperate to sell (mortgage crisis) you should be able to negotiate a fair bit. Just make sure to lock in your rate and be sure that you can actually afford the new payments, increase in taxes, increased utilities etc. Does anyone know of any foreclosures websites where you can actually look at houses in your area without having to sign up for an account? without having to pay any fees?

**Joan.of.the.Arch** · 03-07-2008, 07:27 AM

Originally posted by zetta View Post

but on the other hand, during a buyer's market you are getting the new house at a lower price, with better potential for future profit.

This is an assumption you might want to think about. My understanding is that except in the last few years the rise in home prices has only mirrored the rise in general inflation , so that increased home prices did not really mean profit for the seller. Oh, more dollars were received upon sale, but not more purchasing power. We might have to change our current ideas about homes holding potential future profit.

**jIM_Ohio** · 03-07-2008, 07:45 AM

Originally posted by jimmyengland View Post

I totally agree with jc3900, a buyers market is always going to be your best bet. Now in my opinion is a great time to move with interest rates dropping and plenty of people desperate to sell (mortgage crisis) you should be able to negotiate a fair bit. Just make sure to lock in your rate and be sure that you can actually afford the new payments, increase in taxes, increased utilities etc. Does anyone know of any foreclosures websites where you can actually look at houses in your area without having to sign up for an account? without having to pay any fees?

rates moving down? where are you looking? rates are moving UP short term right now.

**Scanner** · 03-07-2008, 07:51 AM

If you can rent your old house out, wait for the market to turn and buy a new one. . .that's optimum.

**jIM_Ohio** · 03-07-2008, 07:52 AM

Originally posted by Joan.of.the.Arch View Post

This is an assumption you might want to think about. My understanding is that except in the last few years the rise in home prices has only mirrored the rise in general inflation , so that increased home prices did not really mean profit for the seller. Oh, more dollars were received upon sale, but not more purchasing power. We might have to change our current ideas about homes holding potential future profit.

I have a $350,000 house. I will likely sell it in 20 years for around $500k or $600k. To get the $350k asset, I will likely be paying $600,000 total (principal+interest) and have to pay around 100k in taxes during the 20 years.

I would not look at the house as an investment. The sale gives me current dollars for older cheaper dollars (so it does keep pace with inflation), but overall I do not think rising prices/falling prices should drive the purchase of the house. Maybe the sale- you want to sell at a relative peak, but where you buy, if in it for long term, will not make a huge difference because the 20 year trend will be upward- the exact buying point should not be a huge issue.

We put a deposit down in our neighborhood on a house 18 months before we bought this one. A few hiccups came and we asked for desposit back.

18 months later we bought same house, just built further down road. Same model, same options. Cost us $75,000 more to build 18 months later. But we were debt free when we moved in second time. And our lot is wooded. It's possible when we sell we will get the extra $75,000 back- our lot is more secluded than one in front of neighborhood, and most houses in our section were sold about 50-100k higher than same houses (same floor plans) in front of neighborhood. But I can only tell you if this is true after I sell.

**LivingAlmostLarge** · 03-07-2008, 07:58 AM

When you can afford it and need it. We bought in 2005 at the peak of the market. Well not quite, but close, about a year after the peak. But it's gone down since then. But then what does it matter until we sell?

If we needed more house, we'd buy. But since we're quite happy it doesn't matter. We also bought in 2002 and it was going up. Thought it was a peak, but it wasn't.

So you really can't predict the market.

**jimmyengland** · 03-07-2008, 08:04 AM

Jim,

Where are you looking? Here are some facts for you on recent figures.

Loan Type Today Last Week
15 Year Fixed Today = 5.668% last week = 5.918%
30 Year Fixed Today = 6.253% last week = 6.375%
1 Year ARM Today = 5.042% last week = 5.203%
5/1 Year ARM Today = 5.002% last week = 5.140%

In fact if you look at trends over the past six months rates were approx 6.6 30 yr fixed in sep and today 6.25%. That would suggest rates are dropping.

**noppenbd** · 03-07-2008, 09:19 AM

Check out bankrate.com's 30-yr rate charts. I think it is fairly clear that the recent trend is up, in a big way. Although they have been higher in the last six months the trend is definitely up at this point.

**jIM_Ohio** · 03-07-2008, 09:29 AM

Originally posted by jimmyengland View Post

Jim,

Where are you looking? Here are some facts for you on recent figures.

Loan Type Today Last Week
15 Year Fixed Today = 5.668% last week = 5.918%
30 Year Fixed Today = 6.253% last week = 6.375%
1 Year ARM Today = 5.042% last week = 5.203%
5/1 Year ARM Today = 5.002% last week = 5.140%

In fact if you look at trends over the past six months rates were approx 6.6 30 yr fixed in sep and today 6.25%. That would suggest rates are dropping.

I am looking to refinance and rates I am checking are going up short term relative to beginning of month (look for thread I started when fed cut rates).

**jimmyengland** · 03-07-2008, 10:03 AM

since the fed keeps dropping the fed funds rate wouldn't this drops rates also shortly????

When is the best time to "trade up" on your house?