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    A woman in her 50s rests her chin on her hand as she thinks about her future.

       2010:
       Buy up? 
           Stay and Remodel?
               Buy down? 
     Just wait out the market?
     
    Your life has changed  
    Something in your life has changed. Perhaps it's just that some time has passed since you last looked at your home equity. Perhaps it's a significant change in your life circumstances or a desire to pursue some new interests that require a different type of property:
    • the loss of a life partner
    • one or more family members 'leaving the nest' to go to college or to form their own new family
    • wanting to live in a more 'sustainable' environment
    • a retirement or other reduction in income
    • a significant illness and its associated costs
    • a unique business opportunity

    As you review your possible financing options, you include the equity in your home. Based on the negative reports you've been hearing and reading about, you wonder exactly what equity you do have and how best to access it.

    Your disappearing equity  
    You've noticed neighbors whose houses have been on the market for months without even an offer. You've seen the occasional 'foreclosure' or 'bank owned' sticker on a 'for sale' sign indicating the owners weren't able to sell in time to avoid losing the home.

    You've read articles in your local newspaper describing how much cheaper houses in your area are selling for than they did a year earlier (when they sell at all). You may even have heard references to 'short sales,' when lenders agree to accept less than what is owed on a particular home based on it actually being worth less than what is owed against it!

    Many refer to the current housing market as being a 'down market.' What is a 'down market' and how does it affect you? 

    During your lifetime you've seen housing prices fluctuate both up and down (but with an overall upward trend). If the downward trend holds steady over a long period of time, people begin referring to it as a 'down' market. Two characteristics are prices declining and inventory increasing. Sales prices are usually measured by 'median' sales price (as many houses sold above that price as sold below that price). Inventory is measured in 'months supply.' (If houses continued to sell at the current rate, it would take that many months to sell all the houses currently on the market.)

    In Clark County Washington (includes Vancouver, Camas, Washougal, Brush Prairie, Battle Ground, LaCenter, and Yacolt), compared to a year ago (per Regional Multiple Listing Service)-

    • the median price for a closed home sale has gone from $252,000 to $233,800 now (Oct. 2007 vs Oct. 2008).
    • the inventory of homes right now is now about 13.7 months worth.  A comfortable inventory is considered to be less than a 6 months supply. (At the last peak in the pace of sales--June 2006--there was only about a 2 months supply!).
    Four real estate strategies in a down market  
    • 'Buying up'- selling your current home and buying a more expensive home
    • 'Buying down'- selling your current home and buying a less expensive home (not necessarily a smaller house, although it might be)
    • Financing improvements- borrowing to either make your house more saleable or more suitable to your lifestyle (and possibly both)
      • refinancing your whole mortgage, borrowing against only the home's equity or taking out a 'reverse mortgage' (only for homeowners over the age of 62)
    • Borrowing without making improvements (when your need for money is outside the need to change or improve your property, such as to help send a child to college)
    Buying up in an down market  
    From strictly a money leveraging point of view, buying up in a down market is beneficial. While the price of the house you're selling will be less, so will the price of the more expensive house you want to acquire. Assume that your house will now bring $300,000  and the house you'll buy will cost you $400,000. Let's assume that in a year or two house prices will be going up 3% per year. Your old house would only be going up $9,000 per year while your new one would be going up $12,000 per year.
     
    Buying down in a down market  
    Buying down generally will have the reverse effect of buying up. As homes begin to go up in value again, it will be starting from a smaller price and therefore will give you less dollar increase per year.  But it still could be the right choice for you if you need to reduce your payment NOW.
     
    Staying & reinventing your current home  
    Finally, you may be able to stay in your current home and accomplish most or all of what you need to do. If you have sufficient equity, you may be able to-
    • refinance to reduce house payments or create money for living
    • refinance, take out an equity loan or a reverse mortgage to change the size and/or configuration of your living space or yard-
      • for new pursuits or hobbies (add a sewing room or shop, put in a large garden, etc.)
      • to reduce time/energy used for maintenance (add solar; insulate and weatherize; add native, low-maintenance landscaping)
    • you may also use any of these financing types simply to provide money for living expenses
    Conclusion  
    Life decisions are complex. I'd welcome the opportunity to meet with you to hear what your needs and goals are. I've been able to help many individuals, couples and families move forward confidently with the real estate components of their life plan. In addition, I work with the finest lenders, and the best estate planning and real estate attorneys in Clark County.

    Please call me at (360) 600-1050 or write me today. We'll set up a convenient time to meet and discuss your real estate needs and questions. This is a free and no-obligation opportunity.

    If you'd like to tell me more about your needs, you can do so here.

    If you'd like me to analyze your property value, request a market analysis here.

    Let me put my 16 years of training and experience in the Clark County Washington/Portland Metro Area to work for you.

    Janine
    Janine L. Hook, J.D., CRS, GRI, ABR, e-PRO certified, QSC, SRES
    Keller Williams Premier Partners

    Tel:  360-600-1050                Fax:  866-596-2661

    Email: janine@HookedOnClarkCounty.com

    © 2008 Janine Hook and Chuck Pierson. All right reserved.