There are times when I just don't have any empathy for the folks who get themselves into financial trouble. These potential or definite buyers just didn't understand the importance of basic math skills during their younger days.
As the market is dry of first-time home buyers, the latest carrot in the form of realtor advice goes like this:
If you currently own and live in a unit that you've outgrown, this is a good time to upgrade your living standards (due to inventory choice) since what you are losing in opportunity selling price will be offset by your reduced buying costs. If you agree with this thesis, go directly to bankruptcy court; do not pass go and do not ever own real estate!
"Doubling down" on the market's trend is a fool's game - especially at this stage of the cycle. The reasons are simple, even under conservative estimates.
Let's assume the market has dropped 10%. By example, your expected sale proceeds from your existing home are deemed to generate proceeds of $405,000 (down from 450,000) and your desired purchase is valued at $499,500 (down from 555,000).
While your price shifts are viewed in percentages, your "absolute" risk - dollars - has been rolled up to a greater percentage of your worth! Unless you've picked the bottom, you are about to lose even more in your new digs than you are in your past/existing situation. Your larger down payment is about to erode more of your worth in the continued decline and trigger your day with the banker and the judge.
I can't emphasize how many times I've had this conversation over the past six months. If they're friends, I just hit them on the side of the head!
Do you like catching a falling knife? What's your excuse?
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