Moving Up or Moving Down

The term “move-up” in this article refers to a move from a lesser-expensive home into a more expensive property. It usually involves moving into a larger home and/or one that has more amenities. As families grow in size, they often need more space and desire to make a move from a condominium (high-rise unit or townhouse) in to a single-family house. Or, a family may want a house in a different location such as closer to town or to a beach. A “move-down” usually involves owners where their children are gone and they no longer need or want the maintenance involved in a large house. Such families often want to move to a maintenance-free condominium that is close to shopping, restaurants, etc. In the context of this article, a move-down is from a more expensive home into a lesser expensive property.

I’ve experienced a number of both up and down markets during my 30 years of owning a real estate company on Oahu. Many owners wait until they are in the midst of a hot market before they seriously consider a move, be it up or down. While that may be a good decision for a move-down, it may be the wrong time to make a move-up into a more expensive property.

My comments in this article assume that in both a hot market and a slow market, homes increase or decrease in value by the same percentage which, of course, seldom occurs in real life. Let’s first consider a move-up. Assume a young family has outgrown their $400,000 condominium and now wants too move into a $600,000 house. If it is a hot market and prices have increased by 25%, their $400,000 condominium has gained $80,000 in value; i.e., it was worth $320,000 before the hot market and increased by 25% of $320,00 = $80,000 and now has a value of $400,000. Using the same logic on the $600,000 house they want to buy, it has gained $120,000 in value; i.e., it was worth $480,000 before the hot market and increased by 25% of $480,000 = $120,000 and now has a value of $600,000. Today, the difference between the $600,000 house and the $400,000 condominium is $200,000; the difference before the hot market was $120,000; i.e., $480,000 less $360,000. The young family gets more money for the condominium they are selling; however, the house has increased even more in value. So, if possible, always try to make upward moved in flat or down markets.

Just the opposite is the case with a move-down. If possible, always try to make those moves in a hot market. The home you are buying will cost you more, but you’ll more than make up for this increase in cost by the higher price you’ll be getting on the more expensive property you will be selling.

Back to For Buyers