Myth: Home Sellers will make more money if they wait for the market to recover.

Suppose Mr. Jones bought a house in 2006 for $300k. He put 10% down, got a then current loan rate of 6.75%. He pays the bank $1750 per month for the mortgage.

Home values in Chicago have fallen off by about 20% since the peak of the market. According to JP Morgan Chase, they will drop 6-7% more in 2012. This means that the Jones house will be worth about $225600 this year.

Moody’s Analytics predicts that values will increase at about 1.2% per year after 2012. At this rate it would take about 20 years for the house to turn an 8% profit over its original price of $300k.

Mr. Jones could wait until 2031 to sell, or he could sell now and buy the bigger house next door. It’s listed at $440k. with 10% down at today’s rates of 3.91% his monthly payment to the bank would be $1870. Let’s see which scenario makes more money in the long run.

Monthly PaymentEquity AccruedInterest Paid to Bank
Waiting until 2031$1750$181k$344k
Moving now$1870$195k$231k

If Mr. Jones sells his old home and buys a larger one, he will gain $14k in equity and save $113k in interest over the next 20 years.

Want more stats? Curious about my math? Let me know in the comments!

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