Downsize for a tiny profit now, or wait?

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Dear Real Estate Adviser,
We have a large home with a mortgage of about $1,200 per month, and we want to downsize to a smaller place. But the homes in our area of Florida are either selling way under their value or not at all. Should we just wait to see if housing prices go up, or should we sell now and end up with a small profit, then buy a manufactured home? We’d love to move back to our home state of Massachusetts, which I realize might be tough.
— Eileen G.

Dear Eileen,
I can’t give you a definitive answer, but I can arm you with some information that might help you make the call. What I can say is that it looks like we’ve not only skidded to the end of what seemed like an endless bottom in this housing cycle. We also may be pushing gingerly northward for the first time in five years.

Home prices are starting to rebound in numerous markets. Recent national reports show fewer foreclosures are occurring in the hardest-hit states — including yours. Housing inventories are down because new construction has been minimal. Investors are returning to the market, but with a few more financing constraints this time. Many markets are again reporting multiple offers on homes. As for Florida, sales of existing single-family homes in August were up 10.8 percent compared to the same month in 2011, with the median sales price rising 5.8 percent to $147,000, according to Florida Realtors. Town house and condo sales were up 5.7 percent. So far, so good.

There are some cautions: The summer numbers were pretty good but that’s always the strongest time of year for real estate. America remains in a controlled austerity mode. In fact, veteran real estate people will tell you that a market is not truly in recovery mode until you’ve seen about a year of solid price increases. Remember the three or four encouraging rallies we’ve had in the past couple of years that quickly fizzled out?

Moreover, every city is different and yours could be slower to improve than other parts of Florida. Even with market improvements, you may still have to wait quite a while — years perhaps — to get the price you’d really like to get, depending on your definition of “selling way under value.”

As you no doubt know, property prices are higher in your native state of Massachusetts, where the median home price for a conventional home is $325,000. Hence, you are considering a manufactured home, which is essentially the modern version of the old mobile home. Manufactured homes are priced less than conventional homes and their close cousin, the modular home, which is built in sections at the factory.

But manufactured homes typically can’t be bought with a traditional mortgage because they’re considered personal property such as a boat or car, so a purchase may require a personal loan. Often, the lot may not come with the home, so you may have to buy property or pay “ground rent.” Given the fact that many cities in Massachusetts allow such homes only in manufactured housing communities, there could be a scarcity of spaces and limited resale potential.

You might find that a condo, town house or modular home may fit your budget better and be easier to resell in Massachusetts, which has recovered slightly faster than Florida.

As for your sale, the most relevant trend information will come from your local market and recent comparative sales there. Do consider that interest rates, which remain very low at present, are greasing the skids for what seems like a growing wave of opportunistic homebuying and home selling. Good luck in your decision!

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