Movin on Up - What Does it Look Like to Sell your Current Home and Upgrade to a New Home?
So you hit the jackpot in Fort Collins and bought between 2011-2013. Congrats, you've experienced some PHENOMENAL appreciation in your home. But now, you're family is growing or maybe you'd just like to upgrade.
And according to housingwire.com you are probably considering the move subconsciously even if you don't realize it. In 2018 the average length a homeowner stays put in their home was 8 years. So statistically speaking, if you bought in 2012, you about to move!
I've seen some interesting sales material out there in regards to moving up from your starter home to your second home.
So, I decided to do some analysis, considering lots of assumptions and figure out how it would look in Fort Collins to "move up" to your second home.
Here are some of the assumptions (if you agree with them, continue reading, if you don't, well keep reading and tell me why):
-According to Trulia.com the average starter home is between 1,187 and 1,211 square feet. I used parameters of 800-1,750 Square feet.
-The geographical boundaries I used was South of Prospect, North of Horsetooth, East of College and West of Lemay.
-Homes bought between 1/1/2012 and 12/31/2012
Here is what I found:
-The Average Home Sales Price: $202,000
-The Average Square Footage: 1,445
-The Average $/Ft Sales Price: $145
According to thelendersnetwork.com the average 1st time homeowner puts down 6%. In 2012, according to Freddie Mac, the average 30-year fixed rate was 3.66%.
After 8 years, having put down 6% on a $202,000 home at 3.66% interest and not refinancing or putting a HELOC on your home, you would have a remaining principal balance of roughly $157,590. Your monthly PITI (Principal, Interest, Property Taxes and Insurance) on this home, in 2019 would be $1,145/Month. The average property taxes in this area in 2019 were around $1800 and insurance of $1500 annually.
NOW, should you sell your home and "upgrade" to a bigger home. First, lets calculate what you could get for your current home.
In those same geographical boundaries, here are the statistics:
-The Average Home Sales Price: $371,655
-The Average Square Footage: 1,487 (should have been the same, so this number suggest similar types of homes are selling. Good)
-The Average $/Ft Sales Price: $254
What can you NET (after paying all realtor fees and closing costs) on your home:
*8% Closing Costs ($29,732)
Less Outstanding Loan of: $157,590
=Net Proceeds of Sale $184,333
Wow! Not bad! You have $184,333. That's tax free too (consult your tax professional), but as an individual selling your home you lived in 2 out of the last 5 years, you can take up to $250,000 GAIN tax free.
NOW, lets look at what it looks like to "upgrade". These, I had to make up and couldn't really find any supporting data. You could view upgrade as a better location, more amenitites, higher finishes, newer construction or maybe more square footage and bathrooms. I tried to keep it easy. I went with more square footage. 2,500 to 3,500 total finished square footage. Don't you want a guest room now? An office, study? A rec room? Those require more square footage, so for this analysis, I kept it simple and went with additional square footage = "upgrade".
There were no geographical boundaries used when looking at the "upgraded" home.
Here is what I found since January 1, 2020 with 2,500-3,500 Finished Square Feet:
-The MEDIAN Home Sales Price: $475,000
-The Average Square Footage: 2,987
-The Average $/Ft Sales Price: $176
Okay, so now you know what you could sell your home for and what the price tag would be of a new home if you were to "upgrade".
Depending on whether or not you want to put the ENTIRE $184,333 down or maybe "just" $150,000 down and keep $35,000 for a rainy day, your monthly PITI would look like:
*Assumption: Property Tax of $2600 and Insurance of $1800 annually
*Assumption: 30-Year Fixed at 3.75%
-PITI Putting $150,000 Down on a $475,000 home: $1,870/Month
-PITI Putting ALL $184,000 Down on a $475,000 home: $1,713/Month
What does this mean?
It's going to cost you an extra $568 to $725 per month to upgrade your home. ROUGHLY.
Here are some additional things to consider:
-You are now getting more bang for your buck. Your sales $/Ft was $254/Ft and your purchase $/Ft is $176. You got more home for your buck.
-The Average DOM (even though we are looking at January) for the "upgraded" home was 90 days. You won't have as much rush or fighting as many people at this price point.
-Your equity remains with your new property. The $150,000 to $184,000 as down payment is being deployed as equity. That should increase monthly with the portion of your mortgage payment going towards principal.
$568 to $725/Month is no small amount. Is getting the extra 1,500 square feet of home worth that to you? Maybe... Shoot, some folks are paying $2000 a month for a 1,500 square foot 4 bed 2 bath bi level. Or, you could always just buy a luxury home in Fort Collins and call it good.
Anyways, this was another fun exercise for me to look at what the market has done over the last 8 years. What your purchasing power is and what that would look like "upgrading" your home.