Danielle Lazier

San Francisco Real Estate – Is it smart to trade up to a nicer or bigger or ideally-located home in a buyer’s market?

San Francisco Real Estate Conundrum: Is it smart to trade up to a nicer or bigger or ideally-located home in a buyer’s market?

Under many circumstances, it is smart to trade up in a buyer’s market. How can this statement be true? Let’s look at an example.

Example:  Let’s follow two San Francisco properties from peak to trough of a SF real estate market cycle.

• Home #1 – The starter home: Inner Mission 1 Bedroom Loft Condo
• Home #2 – The desired trade-up home: Noe Valley 2+ Bedroom Single Family Home

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Tags: Buyer's Market, trading up

Yeah, it’s a great time to buy but is it a great time to buy…for YOU?

Yes, friends, that is the real question.

I don’t  have to tell you that right now is an uber-fantastic, once in a generation real estate buying opportunity because you already know that!

The combination of LOW mortgage rates and declining prices makes a perfect storm for first time buyers and “trade-up” buyers (those who have owned their starter homes for 5+ years and are ready to move up the food chain). Yeah, you’re tuned in. You know this part.

What you may not know is that just because it’s a great time to buy, in general, does NOT mean it’s a great time to buy for you.

Experience has shown time and time again that owning real estate, especially in desirable cities like San Francisco, will be a smart move in the long-run….regardless of WHEN you buy.

Yup, even us crazies (myself included) who bought in the “Go-Go 2000s” will make a great ROI after living in our homes for a few years. Plus, we get the many “joys” of home ownership and the many tax benefits in the meantime.

In any type of market, folks are buying and selling real estate. Some are making money and some are not. This is true in a buyer’s market, a seller’s market or anything in between.

Whether or not it is a good time to buy or sell real estate depends on your individual and very specific situation.

Where are you financially, emotionally, psychologically? What is going on in your life? Where are you headed? Is your job stable? Are you moving out of town? Do you want to live here comfortably for at least the next 5 years? Are you getting hitched? Having a baby? Have you out-grown your home? Is it too big or too small? And on and on.

Let me tell you a story.

Okay, so I answer questions on Trulia from time to time. If you’re looking at my blog page, see the feed to your right. While you’re at it, follow me on Twitter!

Recently, a couple asked a question on Trulia about their situation. They owned a house in District 10 and were wondering if they could sell that house and buy a another home in Bernal Heights or Glen Park.

Guess what? Most of the agents answered that the real estate market in District 10 is too tough. Don’t sell. It’s a terrible time. You gotta wait it out. Etc etc.

These agents gave their “knee-jerk” reactions to the market and to the idea of selling a home in District 10. They didn’t ask these folks any questions! They just told them what to do!

My approach was to offer a few scenarios of when it works to trade-up in this market while also including some cautionary tales. But, mostly, what I suggested is that we talk “off-line” about THEIR particular situation.

In reality, these folks had owned their home for 10 years. Even in today’s market, it had pretty much doubled in value. They had also saved money on the side. They were ready to “move on up”: financially, emotionally and logistically.

Guess what? They bought a gorgeous new home at a discount and sold their old home quickly and for a pretty darn good tax-free profit. They’re psyched.

The moral of the story: Figure out what makes the most sense for you on an individual basis. It may be the right time to buy. It may not. For that matter, it may be the right time to sell. It may not.

Make sense?

Tags: great time to buy, San Francisco Real Estate, trading up

But my San Francisco condo’s value is down. Why on Earth would I trade-up now? Um, b/c it could make you money.

Trading Up in a Down Market: The Benefits

I’ve blogged before about the benefits of trading up or moving up in a down or flat market like we have here in San Francisco (i.e. going from your “starter home” to one that has more room and the location you really want).

However, I never took the time to actually lay out what I mean. Here goes.

Example:

You bought your starter condo for $600,000 at the top of the market which was 2004/2005. The place you really wanted (we’ll call it your dream home) was worth about $900,000 back then.

Say San Francisco home values are down about 10%. It may be more or less depending on your location and property type but for the sake of this example, let’s use 10%.

Your condo is now worth $540,000, a $60,000 decline.

Your dream home is now worth $810,000, a $90,000 decline. See where I’m headed with this?

If you chose to sell your condo at the reduced price and move up to the bigger home, you will end up saving money.

The difference between your “starter” and your dream home was $300,000 at the peak. The difference is now $270,000.

Net savings = $30,000

If you sell in a down market, you are also buying in a down market. If you wait for the rebound in a year or two, your dream home will also have rebounded.

Don’t look at your real estate plans as a single, isolated event. It’s gotta be in context. Consider your entire transition from one home to the next.

A good way to start is to find out what your home is worth AND what your dream home is worth. See if the math makes sense.

Bernal Heights

Tags: down market, moving up, trading up