Buying Up in a Down Market

With the recent decline in real estate values, you may have heard somebody say that it is a good time to “buy up when the market goes down.” The question is – what do they mean exactly?

With real estate prices throughout Vancouver and the Fraser Valley down in the neighbourhood of 10-15% in the past year, this can be a great benefit to those wishing to upgrade to a bigger and better home. How does this help? Perhaps an example will illustrate this best.

Let’s say for simplicity that the market for all homes was down 10% from the peak of a year ago. If the current home that you live in was valued at $400,000 1 year ago, this would mean that with a 10% drop in value, it would be worth $360,000 today – a drop of $40,000. If the bigger, better home that you are now wanting to buy was worth $800,000 last year, with our simplified example of a 10% drop, it would be worth $720,000 today – a drop of $80,000. As you can see, your house dropped $40k but the house you want to buy is now $80K cheaper.

And now the even better part. One thing that our simplified 10% example doesn’t take into account is the fact that in general, higher priced/luxury properties have taken the biggest hit and in a real life example would probably be down more than 10% – probably more like 15-20% depending on the area.

I won’t even get into the details of the further benefit realized by the historically low mortgage rates that are available right now. I’ll leave that up to Zach to explain!

Now IS a GREAT time to buy!