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Move-up Mania

Written by Jaymi Naciri on Thursday, 11 September 2014 11:17 am
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You've got equity to spare. Your 2,000 square feet is starting to feel more like 200. All the neighbors are doing it. It's time to play a game of Move-up Mania!

Homeownership isn't the American dream - moving up and up to get to the home you really want is, right? Is it time for you to play the game? Answer the following questions and find out.

1. How close are you to being free and clear?

Depending on how long you have been in your house and whether or not you have been overpaying your mortgage, you might be closer to paying off your house than you thought. If it's a dream of yours to own a home outright, well, maybe you want to rethink the move-up thing. Or, you could look into renting your existing home. If rental rates in your area are strong, you may be able to rent it for more than your house payment and use the money you'll make to cover the difference in your new house payment.

2. Is staying in your existing neighborhood important?

Your kids may not appreciate the extra bedrooms or the pool out back if they have to move our of their schools and leave their friends behind. Make sure if you're making a move for the good of your family that you are in touch with what your family really wants.

3. Do you really need more space?

If you answered yes, do you need more space more than you need a college fund or a nest egg? It all comes down to priorities.

Yes, space is important. If you have more children than bedrooms, more stuff than you can store, or are in an older home that would be impossible and/or price prohibitive to enlarge and/or update, that's one thing. If it's just a "Keeping up with the Joneses" thing, well, then there are a few other questions you'll want to ask yourself, like whether or not the Joneses will make your house payment if you get yourself in trouble by biting off more house than you can chew.

4. Do you want to do your part for the economy?

By most accounts, move-up buyers help move the economy along by stimulating the real estate cycle. More first-time buyer homes on the market means more first-time buyers. "The return of move-up buyers is good for the market as a whole," said MSN. "It brings more homes to the market, particularly much-needed starter homes, as these buyers trade up. It's also a good sign for the broader economy. An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending. These buyers are typically more responsive to market conditions and financial incentives."

5. How much can you reasonably afford to increase your payment?

Even with equity in your existing home, you may still have increased costs once you move.

"Often times, we eyeball these things: rates are still good, you just got a raise, you can well afford your current payment, looks like your home is worth more now and those houses up the hill don't cost that much more," said Forbes. "There's a lot more to account for in this equation. You need to factor in what the actual increase in your mortgage payment will be, but also how much you'll net on your home, how much cash you'll need to close on your next one, and how much your utilities, property taxes, insurance and other home-related expenses might increase if you move up."

6. In many areas, ample equity makes the move up possible. But is a big step up doable in your desired neighborhood?

In some markets, the disparity between your starter home and the one you want to move up to is vast, and some move-up buyers simply can't make the leap.

"Move-up buyers (may not) have enough equity in their home or liquid cash to purchase another home," said CNBC. Fast-appreciating markets throughout the U.S. and even in Canada may be feeling the pinch.

"It's not just first-time buyers who are finding themselves priced out of fast-appreciating housing markets — the high price tag of properties is also starting to ‘paralyze' the move-up market," said The Star.

7. Should you stay put and renovate?

Whether to move or improve is always a difficult question, but "a few cost-benefit calculations can help you make the right decision," said Houselogic.

"As a general rule, improving costs less than trading up. But it depends on what kind of improvements you're doing," they said. "Figure paying somewhere between $100-$200/square foot for new construction or a major remodel, depending on the scope of the project and labor costs in your area."

If your move-up plan was predicated on not having enough space for family, it might be a smart decision to add on. Not only will you get the space you need, with a design created to your specifications and style, but you may also increase the value of your home. See the Remodeling" magazine's 2014 Cost vs. Value Report to get an idea of return on investment for different improvements.

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