If you want to upgrade your home, get excited! The perfect time to upgrade to your move-up home is coming. Meanwhile, be patient and build your cash reserves.
I really can’t believe the good fortune for move-up homebuyers. The supply of homes has stayed relatively steady (and still well below pre-pandemic levels), but the demand for homes has been dropping since the end of 1Q 2022 given mortgage rates have increased by ~2%.
For those of you with strong cash flow and large cash balances, you should appreciate this economic environment. Not only is the Fed helping you make nicer homes more affordable, you’re also getting a higher return on your risk-free cash.
The Desire For A Nicer Home
As a parent to two little ones, I’m actively trying to accumulate more money to live in the nicest home possible. After all, the best time to own the nicest home you can afford is when you have the most number of heart beats living at home.
Once your kids leave for college, it’s unlikely you will be buying an even larger home. That would feel wasteful, lonely, and illogical. Rather, you’d probably either just keep your home or downsize. Maybe a condo by the ocean would be nice.
In 2020, I climbed up the home upgrade ladder when we bought our current home. It has the ideal floor plan for work from home parents with kids. Having an office is huge. It even has an extra room for an au pair.
However, two years have passed and there are more home deals appearing at higher price points. Even though I said that I had bought our forever home, as a real estate fanatic, I’m always looking.
It took a nationwide lockdown for me to buy a move-up home. That felt super scary at the time. Soon, you can just buy a move-up home simply because bidding wars will disappear.
The Best Time To Upgrade Your Home
The perfect time to upgrade your home is in year two or three of a real estate down cycle. Historically, real estate moves in seven-to-ten year up cycles and one-to-three year down cycles.
The risk of buying after only one year of declining prices is that prices could still go down for another one to two years. And the risk of buying three years after the peak is that you might miss the bottom.
You see, it’s hard to know when the peaks and troughs are in any real estate cycle until about six months AFTER they happen. Therefore, the perfect time to upgrade your home …….