NOTHING if you are upgrading.....and likely not as much as if your money was in the stock market!
Within the last 24 hours, 2 clients have contacted me about how they were considering upgrading to a better home/location but now they have "Lost" money on their current house. One client is somewhat okay with this given that they recognize that they will more than make that up when they buy up in the market...the other client has unfortunately received "advice from several people" that it doesn't make sense to sell in this market...well I have to ask, just who are these people giving the advice and have they actually made any money in real estate? have they done the math? do they understand the concept of the benefits of upgrading in a down market? Sigh....in my opinion, this type of market is the best type to upgrade in....there are some great deals-here is a snippet of what I emailed one of these clients in response to the clients questions/comments:
well there was recently a house in a fabulous location (3300 block of West 5th) that went in the 800s so there are some great deals out there
you will likely not really be losing: In theory I "lost" money on a house I had in the 90s-i paid more than I sold it for but I bought into a much better location at a great price-which I wouldn't have been able to do if the market hadn't been down....
it is tough to "lose" if you are upgrading in a down market; it is easy to "lose" if you are upgrading in a strong market...people don't get this so they would rather sell in a high market and buy in a high market, even if in true dollar terms it ends up costing them a lot more
if your place would have been $670 and is down 10% say then you "lost $67k
but if what you are buying is $750 it would have been 10% higher so you would be saving $75k AND moving somewhere better so its math plus life satisfaction! and the higher up you go, the more likely it has come down a bit more than the lesser priced properties as the market is still heavily fueled by first time buyers who can only afford so much
(for more info, see my blog Aug 25th and 29th-the latter refers to a Smart Money article which I am pretty sure also discusses this issue)
The bottom line is it seems to be simple math; yes Vancouver is expensive; yes the market is slow and prices have come down BUT if one is upgrading, these conditions seem ideal....and the greater the upgrade, likely the more the seller who then buys will be making in dollar terms.....so if one sells what would have been a $500,000 condo last year and now only gets $450,000 then they have made $50,000 less than they would have last year....but if they are buying a house that last year was $1,000,000 and now it is also down 10% (to $900,000) then they have saved $100,000. So if the price difference last year was $500,000 ($1 million purchase minus $500,000 sale) and this year is $450,000 ($900,000 purchase minus $450,000 sale) then they are ahead by $50,000. Hmm pretty good math to me-you can do a nice reno with the extra $50,000!
Am i missing something here?????