When is a Good Time to Trade Up to a New Home?

If you’ve been dreaming of moving to a newer or larger home “someday,” you might consider making that “someday” today! The current real estate market presents a great opportunity for homeowners: It’s now possible to leverage the large gains in home equity made over the last several years to trade up to home that meets your needs—in some cases, without adding to your monthly mortgage payment.

Oahu single-family home prices jumped by 20 percent in 2021, significantly adding to the equity of homeowners. A record-low number of single-family homes and condos for sale, along with historically low interest rates for the past two years, has been fueling homebuyer competition and driving prices higher.

It’s a great time to be a seller

There are now many more qualified buyers than there are homes for sale, and competition among buyers is resulting in multiple offers and sales above the asking price. In fact, 55 percent of single-family homes and 36 percent of condos sold for more than the asking price in February 2022. However, this market dynamic could change if interest rates rise higher or faster than anticipated, or if global instability or inflation concerns slow buyer demand.

Unprecedented home equity gains

Many Oahu homeowners have seen unprecedented gains in home equity in the past year. Single-family homes purchased just five years ago have gained an average of more than $250,000 in value. For condos, the average equity gained since 2016 is $85,000. Chances are, your home has appreciated in value more than you realize.

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Rates are low, but rising

Although mortgage rates climbed higher in mid-March, today’s rates of around 4 percent are still historically low. When interest rates are low, buyers can stretch their home budget a bit more. However, the Fed has already begun to raise interest rates and has indicated that more increases are on the way in an effort to curb inflation. So, if you’re looking to trade up this year, you’ll want to act sooner rather than later—so you can attract more qualified buyers for your home, and so you’ll have greater purchasing power to apply toward your new home.

More options in higher price ranges

Single-family home and condo inventory for sale is at an all-time low on Oahu. There are also fewer choices for buyers at the lower end of the price spectrum, and when lower-priced homes are listed, they usually enter into escrow in a matter of days. The good news for move-up buyers is that there are often more choices as you move into the mid-priced and luxury home market. Demand is not as strong in the higher price ranges, too. Currently, there is a four-month supply of high-end homes for sale, compared to one month of for-sale inventory in lower price ranges.

Get off the fence

If you’re ready to trade up, you won’t want to wait too long. When you move up, it’s important to keep in mind that price increases affect both the home you’re buying and the home you’re selling.  For example, if you want to sell a $1M home and move up to a $1.5M home, and home prices rise by just 10 percent per year, the home you sell will increase by $100,000 in a year’s time and the home you buy will increase by $150,000. In waiting a year to sell, you’ll have lost $50,000.

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