A Good Time to Sell?

You know me well enough to know that I'm a straight shooter, more interested in making sure you have the right advice and insight than in getting a check in my pocket. My reputation depends on that. And it's important to know when market trends are counterintuitive. "Everyone knows" that now's a bad time to sell, if you can avoid it, right? Wrong.

Here's a scenario for you: Assume a household in a great house in Crocker Highlands. They've always wanted to move to Piedmont when their children get to school age. Prices have dropped 15% since the peak, though they are way ahead since they bought in 2001. They really need that fourth bedroom.

If they sold the Crocker house and bought a more expensive home in Piedmont in 2006, they would have sold high and bought high--but they were fully prepared to do it. If they sold today, they would sell "low" and buy "low." The key takeaway is that the dollar price discount on the more expensive Piedmont home is larger than the price discount they'll see when selling the Crocker home [assuming a 15% lower price in both cases].

Let's say the Crocker house will sell for $725,000 (was worth $850,000 at the peak). Including lower brokerage fees and transfer taxes, they'll net about $120,000 less than if they'd sold in 2006. But if they buy a home in Piedmont for $1.5 million (was worth $1.750 million at the peak), reflecting the lower fees and transfer taxes, they'll save about $265,000, compared to a 2006 purchase. Between the two homes, then, they are about $150,000 ahead of where they would be had both transactions closed in 2006.

And don't forget ongoing mortgage and insurance costs. That less expensive Piedmont home translates into about a $15,000 a year savings compared to the carrying costs of that more expensive home not bought in 2006. Email me for a copy of the spreadsheet.

How smart is that?

An even more attractive scenario is moving down-Piedmont homes have held their value quite well through the downturn. The same cannot be said about the condo market in general, nor homes in much of the rest of the country, and particularly in typical retirement areas like Arizona, San Diego and Florida. Unless you're planning to retire anywhere in Texas, in Denver, Detroit, Charlotte, Salt Lake or Philly (according to today's Wall Street Journal), you'll likely be selling "low" and buying "super low"!