The respected financial weekly, Barron’s magazine, published an article this past weekend about real estate markets in the U.S. that are undervalued. The implication is that those who live in those markets and are poised to beat a retreat to, say, a golf community in the Southeast might want to cool their jets for a couple of years. Homes in my own Hartford, CT, market, according to Barron’s, have an intrinsic value 10.73% higher than their current median price; in other words, between now and 2019, the average home in the Hartford market should rise by 11% or more. That ranks fourth on the Barron’s list. Two other Connecticut metro markets are second and third rated on the list, with the Allentown, PA, area listed at the top.
Barron’s could be right on the money, but those who have a plan to relocate but are sitting tight in anticipation their current home will appreciate in value are playing a dangerous game for two main reasons: first, the home they may buy in a few years could very well appreciate at a faster rate and, second, any “loss” they suffer by selling too early will be more than made up by the cost of living expenses they save by moving.
Let’s say you own a home in the Hartford area whose market value today is $400,000 and you have had your eye on a similarly valued home in a golf community outside Greenville, SC. By Barron’s estimate, your current home is worth $445,000, the price you should fetch if you sell it two years from now (in 2019). But the home in the ever-popular Greenville may appreciate at a rate of at least 5% per year over the next two years, as it has over the last four years. At best, you can hope for a wash; at worst, you will lose some buying power. (Note: Many of the golf communities we follow have seen average home sale price increases of 8% or more over the last three years.)
Cost of living difference is an even more profound reason to consider acting sooner rather than later. According to the web site BestPlaces.net, which provides a helpful calculator to compare the costs of living in hundreds of cities and towns nationwide, Greenville is only 2% cheaper to live than in the city of Hartford. However, Greenville is a full 47% cheaper than my town of Avon, CT, 35% less than nearby Farmington, CT, and half that of the upscale Ridgefield, CT. Any increase in home values in these and most other Connecticut towns will never make up for the savings in cost of living by moving South.
If you are considering a move South in the next couple of years, give us a shout –- click here –- and we will run the numbers for you and demonstrate it could be time to get a move on.