Many sellers are holding off selling due to current market conditions and lower selling prices. What many sellers dont understand, however, is that if they are going to sell and buy a more expensive home (buy up), then NOW, in the current market, is the best time to do just that - buy up.

If sellers wait until the market goes back up, and their home's value increases, then the homes they are looking at to buy will also have gone up in price.

So... let me explain. Lets say the seller's current home was valued a while back at $700,000. Let's assume, for example, that market values have decreased 10%; their home is currently worth $700,000 minus the 10% drop in value ($70,000), which is $630,000. In addition, the price range they want to buy in is, let's say, $900,000 (remember, they want to buy "up". )Assuming the more expensive homes dropped 10% in value, too (often even more of a drop in higher-end homes), then that would mean the $900,000 homes dropped $100,000 to about $800,000.

The seller sells their home for  $70,000 less than they "could " have sold it for before the market dropped. However, they buy the more expensive home for $100,000 LESS than they could have bought it before the market dropped. So, they "lost" $70,000 and then bought another home and "saved" $100,000. The math tells us that THE SELLER JUST MADE $30,000 IN EQUITY! This difference gets more dramatic the higher you buy up.

The bottom line: selling in a down market and buying a more expensive home, assuming both properties have depreciated at roughly the same rate, is a SMART thing to do. A seller can actually come out ahead by doing this. Waiting for the market to head  "back up" can actually cost the seller more money than buying up in a down market.

Hi there:

Well, the Fed cut the Federal Funds Rate by a point, lowering the rate to 4.75% from 5.25%.  This is the first move in over a year and the first cut in over 4 years.  This was a bit of a surprise as a majority had expected only a point cut.  This will translate into a reduction in the Prime Rate to 7.75% from 8.25%.  So, anyone with a line of credit on their home will see a point drop in the rate on their line.

The Fed comments indicate they are very aware of the housing and credit problems in the country and that these are and will continue to burden the economy.  The cut was an attempt to forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

The stock market is rallying but the Bond yield is actually up.  This means the Fed cut today is not likely, at least in the near term, to result in lower mortgage rates.  Mortgage rates (and Bond yields) had drifted down over the last month or so as the economic data began to suggest the Fed would have to cut.  Its all about timing.  As I write this, the stock market is up about 250 points but the Bond yield is actually up at about 4.50, up from 4.46 yesterday.  More to come on this as the markets digest the Fed comments.

Now the question going forward is what will the data tell us about inflation, jobs, and the housing/banking turmoil.  More Fed cuts could come if the data suggest more of a slowing of the economy than the Fed is comfortable with.  Hope this helps.

Matt Culp, J.D.

Mortgage Broker/Owner
Bainbridge Lending Group, LLC
510-LO-27342

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