Sell a Home and Buy Another Home in 2015?
Whenever we meet homeowners who are thinking of, or need to sell their San Diego home, one of the first questions asked is whether they should take advantage of making a real estate move in 2015 due the recovery of home prices we have experienced recently.
Most San Diego homeowners are now in a position to realize a profit from the sale of their home – due to an increase in home values – which they could use to add to their emergency and retirement savings, or possibly to use as a down payment to purchase another home.
For some, it may be difficult to think of selling a home as moving can be a hassle. They often never get past this point, end up paralyzed by fear and miss a great opportunity.
As with any decision, it is always better to gather the facts and then consider your options. Our experience is that after laying bare all of the facts and hard numbers, that many sellers would actually be in a better situation if they sold their current home and purchased another one right now.
As San Diego listing agents, we are experienced in helping homeowners achieve their goal of selling their existing home for the best price, and purchasing a new one. Achieving success in this type of move requires a lot of planning and coordination. One also must know how to write the contracts to make this flow smoothly. Ask us how this is done effectively:
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Things to consider when selling and buying a home in 2015:
Will You Be in a Better Place Purchasing a Move-Up Home in 2015?
Increasing Market: Let us assume that you have an equity in the home and ideally would like to move into a safer neighborhood with better schools and amenities. Let us further assume that you have enough downpayment to purchase another home and you would still be able to lock in a low interest rate with an affordable payment. It may make sense to get into a new home while interest rates remain low.
Ask yourself the following questions:
- What type of home will you be purchasing?
- Is the new home in a quality neighborhood?
- Is the new house better suited to your lifestyle?
- How long will you live in the new house?
- How will a change in interest rates affect your monthly payments if you delay buying a home?
- Would today’s monthly payments be affordable, especially if you lock in a low 30 year fixed mortgage rate now?
Declining Market: Let’s assume that the market value of homes in your area have declined 20%. Your current home was purchased for $400,000 – this means that your current value is now $80,000 less. The new home you’re purchasing was valued at $550,000 also has declined by 20% – this means that this home’s value is now $110,000 less. A savings for you of $30,000!
Appreciating Market: If you’re over 55 years old, it could be possible to transfer your existing property tax base to your new home. This could be especially beneficial if you’ve owned your current San Diego home for a long time and your home’s value has increased substantially.
San Diego Interest Rate Forecast
Kiplinger.com is forecasting that interest rates should be near 4.4% by year end 2015. Of course, no one has a crystal ball so we cannot be sure where rates will be. However, mortgage interest rates historically have risen when the economy is doing well. And, many see both employment and economic recovery coming on strong.
Quality Neighborhoods Fare Better in a Recovery
A well kept neighborhood with great schools, close to amenities like shopping, restaurants, leisure activities, that is safe and commuter friendly will likely fare better in a real estate market recovery, enabling you to capitalize on equity appreciation.
Is now a good time to make a Lifestyle Change?
Now could be the best time to purchase a new San Diego home if:
- You’re searching for one that fits your lifestyle better.
- Your family is growing and you need more space.
- You desire to move to a luxury home.
- You’re searching for a home close to more activities that you enjoy.
- You’re looking to get into a smaller home with lower maintenance.
This is the time to consider taking advantage of ultra-low interest rates – which probably have nowhere to go but up.
Time Frame for Living in the New Home
If your move is going to be long-term, 10 years or more, you’ll probably be staying in the new home long enough to enjoy some appreciation. Buying low and selling high, is equity building at its best. If your move is more short-term, 5-10 years, then buying at the lowest price and lowest rate possible is premium.
The Impact of Historically Low Interest Rates in 2015
Which way are interest rates moving? Are they moving up or moving down? If interest rates are near an all-time low and beginning to inch upwards, waiting could cost you more than you would think.
Example – A $400,000 loan at 6% payment would be $2798 PITI per month. The same loan of $400,000 at 4%, the payment would be $2026 PITI – a monthly savings of $771 a month!
This absolutely gives you more purchasing power, or the opportunity to save.
Pay Less Property Tax Than the Previous Owner?
Declining Market: Purchasing a home at $570,000 that in a normal market would be valued at $700,000, would lower that home’s tax valuation by $130,000. Based on a 1.25% tax rate, this would lower the property tax bill $1,650 the first year alone. Because of California’s Proposition 13, your property tax cannot increase more than 2% per year. This lower tax valuation will positively affect your property taxes for years to come – even after the market rebounds and your new home is again valued at $700,000 or more!
Increasing Market: Could you take advantage of transferring your property tax base from your existing home to your new home? 55 and older homeowners may qualify and save money on property taxes when purchasing their new home that suits their needs better. Buying a home from your parents could also qualify you for the parent-child exclusion.
Tax exclusion from selling your primary home in 2014
What are the possible tax implications of selling your home?
Have you lived in the home you would like to sell for 2 out of the last five years, as a primary residence? If yes, you do not have to pay taxes on up to $250,000 if single or, $500,000 if married filing jointly.
If you sold for a loss, you cannot deduct the loss. The current tax code allows you to use this tax exclusion every time you sell your primary home, as long as you own and live in the home for two years and have not sold another home in the last two years.
It is also possible to sell your rental home now without paying any taxes as long as you have not sold a home in the last two years and you have lived in your converted rental property two years from the last 5 years (2009-2014). If the home-sale exclusion does not cover all your profit, the excess gain is reported on Schedule D with your other capital gains and losses.
Read more at Selling Your Home: IRS Publication 523
A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don’t panic over national newspaper headlines – real estate markets are hyper-local and specific to each neighborhood. Make an informed decision based upon facts and help from Local Real Estate Professionals.
Put Our Experience to Work for You
We are experienced in helping homeowners achieve their goal of selling their existing home and purchasing a new one.
If you need to sell your home, call us today at 760-798-9024. Alternatively you may fill out the contact form below or, fill out form to find out what your home is currently worth, and we’ll get back to you quickly.
We can also send you alerts of homes for sale in the location of your choice to keep you up to date on what is available when you are ready to purchase another home.
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