As noted before, I hold 52 open houses a year – the majority of them in Almaden Valley, where I happen to live. Most prospective buyers who tour these homes are looking in Almaden because they covet the excellent public schools. A substantial portion of those buyers are couples who bought their first homes in affordable Blossom Valley and now need more space (and again, better schools) for their growing families.
In the best of times, home appreciation combined with higher salaries make this move doable.
Despite some of the lowest mortgage rates in history and a market that remains firmly in buyers territory (see below chart), these are not the best of times.
My exclusive Market Action Index answers the question “How’s the market?” by measuring the current rate of sale versus the amount of inventory. However, the current buyers market favors mainly first-time homebuyers and longtime renters; the move-up market is hamstrung because current homeowners have lost so much equity that they may not have a large enough down payment to take advantage of the current buying opportunity.
And as the next chart illustrates, that situation is exacerbated for Blossom-to-Almaden Valley movers because more equity has been lost on a percentage basis from the 95123 zip than from Almaden’s 95120:
I have identified one tricky – but not necessarily risky – strategy that could well level the playing field.
Both Almaden and Blossom valleys have traditionally exhibited seasonal price swings that tend to hold true in both up and down markets: Prices tend to bottom in January, begin to climb through spring and early summer, then peak and begin to slide back down in the fall and winter.
My proposed strategy ideally would work like this: List your Blossom home for sale in April, hope to sell it by late May and close around early July. Take a short-term rental or make other plans, then begin looking for an Almaden home in earnest by early October. This should give you time to find your Almaden dream home and be in it in time for the Holidays.
(Yes, a double-move can be a real hassle, but there are ways to mitigate the pain; one possibility is a rentback agreement with your buyers. I recently negotiated a $1.25 million purchase in Almaden in which my buyers were happy to allow the sellers to remain in the home for more than two months after the closing.)
Will it go that perfectly? Probably not. However, the downside risk in the current market is frankly minimal, while recent seasonal price swings in these two markets indicate you could gain a total of $60k to $100k by selling in Blossom while the market’s hot, and buying in Almaden after most other buyers have gone into their annual hibernation.
Take 2010, for instance (please ;]). The average sale price in Blossom Valley rose from $496k in January to $534k in June (+$38,000 if you waited to sell), while in Almaden it fell from $1.025 million in July to $910k in October (+ $115k for you if you waited to buy)! Keep in mind that these are average prices typified by slightly higher values than the median prices reflected in the above chart.
With that kind of money on the table, your timing doesn’t have to be perfect to make this strategy worth considering.
