The other day I was surprised by a young man’s comment that it would be too expensive to sell a house in Denver because he would have to go buy another home. His logic is that prices are up and it would be hard to get a better home than what he owns currently in the Southglenn area. He knows he needs to make a move because the family is growing and they need more room.
As I thought about it he could be right, yet I asked myself “when will there be a better time?” Prices in Denver have accelerated to the point that average sale prices are up 11% to $361,953 from 2014 and median sale prices are up 15% to $314,000. Interest rates are the best I remember since I bought my first house in 1972 at 5.75% (today is about 3.5%) and, as always, are projected to go up.
So is it too expensive to sell a house and buy one in Denver today? Or is the opportunity going to be better next year? Lets try to answer that…
Next year a house worth $300,000 today should be worth about $330,000 or 10% more. Using 20% down payment a $240,000 loan at 3.5% interest rate today would result in a principle interest payment of about $1077.
Next year that $330,000 house will require a $264,000 loan at maybe 4% and a principle and interest payment of $1260 for the same house!
So waiting to replace a home in Denver (you “know” you need to) will cost you an additional $6000 down payment, $24,000 in loan amount and $190 per month.
If I wait to sell my $200,000 house it will be worth more next year! True, but compare that 10% of $200,000 is $20,000 where 10% of $300,000 is $30,000, so by waiting you lose $10,000 of buying power.
Why would you “need to make a move”? Well what I typically see is folks want a different school district; there are more kids on the way so the house is too small; the kids have moved out so now the house is too big; there is a divorce; there is a marriage; or there was a promotion and we can afford it.
So my self serving yet thoughtful response is that if you can do it, you are better off today than next year. What do you think?