Advice needed - trade up in a hot or cold market?

To all the seasoned RE investors, when is it a good time to trade up property - in a hot sellers market like now or a buyers market like 2011?

Obviously at least with a buyers market one would have more choices to choose from and one needn’t feel that he/she has to accept just anything out there. But, that would also mean that the property that you are selling will more than likely be selling for less too (or worst case, not at all, so that is not good). Lower new property tax basis relatively speaking is preferred too of course. It is truly a double edged sword, because assuming a buyers market that has implications that the economy is down probably so that may mean your employment status is impacted too so who is to say that you will even be in a position to buy in a buyers market?

Trade up at the bottom of a cycle. Rationale: Increase exposure to capture price appreciation.
Trade down at the peak of a cycle. Rationale: Decrease exposure to reduce price decline.
Are we at the peak or bottom?

Above ignore other factors like property tax, etc.

Uh, property tax implications (usually higher) is probably the main reason why most folks do not trade up in the first place (regardless if they have a place to sell or not). To quote, “ignore” that data point is foolhardy (IMO of course)…

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Boy oh boy… taking property tax into account, enhance the correctness of my suggestion especially in California. Are you suggesting otherwise?
Trade up at the peak lock on to a high property tax even as price declines… property tax lags.
Trade up a the bottom lock on to a low property tax which increase is capped by Prop 13.

For most people, if they hear or understand that their property tax bill is going up, will stop right there and not make a move. They don’t need to hear anything more. I am crazy enough to think about it because I want a yard and massive garage space for cars.

Trade up at top of cycle. Because trading up means you are getting rid of junk homes for trophy homes. Junk homes are worth the most at top of cycle. Trophy homes will not lose value at down cycle. Better get rid of your junk before sh*t hits the fan.

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It depends. Younger folks whose income will likely go up don’t care too much about property taxes. Their income growth will diminish yhe prop 13. So for those folks (who are most likely to be trading up), moving at bottom cycle is better (higher priced homes fluctuates more in absolute delta).

I say just trade when you need the space or your kids need to go to school.

Saying whether you want to trade in a hot or cold market implies you know which way the market will go couple years down the road. We are in a hot market right now. But does that mean it won’t get even hotter 3 or 5 years down the road? So compared to 2022, 2017 may turn out to be a cold market?

“Just do it!”

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You throw a wrench into my thought.

In any case, I was hand twisted to trade up in 2007, peak price in my neighborhood :grin: Sold townhouse bought SFH. That turned out to be a good thing because I could afford to hold on to both townhouse and SFH at that time but selling the townhouse releases CASH i.e. liquidity to buy another SFH in 2011 :joy: There are so many factors to determine when to trade up or down or don’t care so I just suggest one aspect for trading up or down. You gave another good factor… totally forgot about this factor till you reminded me. You have a good brain.

Trading up (sell the previous house) is not as risky as buying a house (not replacing an existing house) because the additional outlay is not as high as buying a house. Even done at the peak is ok so long as you won’t be forced to sell for whatever reason when the market does come down.

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That is also true, if you cant accurately predict the cycles then anytime is a good time to trade up :rofl:

Trade up when your situation dictates that it’s needed. The stress in a hot market is if you have to sell the current to buy the next. You may want to plan on renting for a bit with how little inventory there is and how competitive bidding is. In a hot market, I’d buy first then sell after. Make offers that aren’t contingent on selling so they are strong even if you plan on selling after.

Oops I should have mentioned in the original post, that it was specific to investment property, so no personal or family life constraints like kids schooling etc.
I too was thinking the down cycle is better because of lower prop tax but good point about trading up to a trophy home at the top as they don’t lose their value in a down cycle. I can already see the differential narrowing when houses in el cerrito are going for 800-900psf while in the city it is 25% or so more

Don’t sell. Just keep buying more then :slight_smile:

I am aware of many realtors and investors who have placed homes, investment properties on the market. The feeling is market probably has no more upside to go soon.
The conservative investors park their money in the bank looking for opportunities. Those who had enough equity sold and moved into more competitive neighborhoods to be close to work. I have noticed since 2016 PA, MV, and many parts of SJ home prices have are stagnant than before. The exception is SU, CU(new Campus) and 95126 near Googl new campus.

Also start this year I see both contingency offers and preemptive offers. One is from a wishful home sellers making early bids. The other got tired getting turn down and offers are more aggressive with 24 hour or 8 hour expiration time.
Sam Shueh

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Any advise to buy know or to wait for whatever would be like trying to time the market.
As an investor, think of the chances of this market crashing. I would call myself a negative person, but since CA is the mother of all job creators, there’s a couple of years to go cocky.

My suggestion to anybody is that if they are ready, and willing to pay current price without crying like a baby if the market crashes, go ahead, make your move. At least you can get rid of one home if that happens and move somewhere else if you become homeless. :rofl:

The chances of another 2008 < > recession, again, can’t be foreseen but chances are that ain’t gonna happen ever. The first guys buying properties or land will be the job creators, they have, are doing it but nobody cries about it.

For those not paying attention, Madera is booming with Amazon in the hood.