Date Archives: October 13th, 2021

Just Because It's A Seller's Market Doesn't Make It The Right Time To Sell

Before COVID, the housing market was robust as low interest rates and limited supply combined to make it a competitive market. Today, after spending 24 hours a day at home for the better part of a year, many renters have jumped into the market looking to buy, and many existing homeowners have decided they need additional square footage. 

When you add limited inventory and historically low interest rates into the mix, we've entered the hottest seller's market in recent memory, with no end in sight. The Federal Home Mortgage Corporation currently, there are 3.8 million fewer homes than needed in the US.

So that means it must be the perfect time to sell, right? Not necessarily. Believe it or not, it actually might not be the best time to sell your home. 

In this post, we will look at the reasons why a seller's market might not be the best time to sell. We will start by asking and answering a few key questions.

If You Sell, Where Will You Go?

Sure it is a hot seller's market in New England, but the market is hot EVERYWHERE! So if you sell, where will you go? If you do not have a second home or are not relocating for work, are you willing to go through the hassle of finding a place, putting your possessions into storage, and moving into a new situation? 

Some sellers are building rent-back agreements into their marketing – sometimes up to a year after closing. This arrangement can work for some buyers, for example, if they are looking for an investment property to write off of their taxes and have no immediate need to take occupancy. But how many buyers will fit into that mold? Most buyers want to move in immediately, especially if they have been renting.

When You Sell, What Will You Buy?

If you do sell and do not want to rent, you will need to buy another home... in the hottest seller's market in recent memory. Good luck! Depending on what you are planning to buy, it may not be the best time to sell after all. 

On the one hand, it is great to be a seller in this market. However, when you sell you then become a buyer and may find yourself in a tough spot if you can't find what you are looking for. It depends on where you are planning to go and what you plan to buy. 

You need somewhere where your dollar will go farther. Will that be the same market in a different part of the area or the suburbs versus the city? You need to do your due diligence and think through the entire prospect. If you end up moving to another location with an inventory shortage, you could end up overpaying, or worse, may not find anything. 

What About Custom Build – When and How Much Will it Cost?

Some people who cannot find a replacement home may consider building one. But right now, thanks to the pandemic, lumber prices are skyrocketing! The National Association of Home Builders reported that the cost of building a home v increased an average of $35,872, putting custom builds out of the reach of many. Lumber is up 300% over last year, there is a concrete shortage, and builders are in high demand and booked for months in some areas so you may have a bit of a wait!

Even Though It Is A Seller's Market, Can You Get the Best Price?

Even in a seller's market, you should do your due diligence. Find out what neighboring homes and comparables are selling for before you place your home on the market. Are people in your area getting a premium, and if so how does it compare to when you purchased your home? If you wait, you might be able to get even more if you are willing to hold on to it.

Do not skimp on the updates. Presentation is the key to getting the maximum value. Have you done smaller improvements or updates recently? If you don't have someone already booked, it might be challenging because everyone else is updating before selling. Contractors are in high demand.

Even in a seller's market, (or especially in a seller's market), your home still needs to look its best to attain the highest price. You do not want to leave money on the table because you did not fix the kitchen cabinet door. Put a fresh coat of neutral paint, freshen up the bathroom grout, and take care of any details that give your home a "lived-in" look or make it look like it needs work.

A Different Approach – Turn Your Home into an Investment Property

Before you rush out and put your home on the market, consider taking a slightly different approach. Explore the possibility of turning the home you are moving out of into an investment property, and you may see significant benefits.

Low interest rates coupled with double-bottom-line financial benefits you will get from rent payments and appreciation make an investment property an attractive choice. It may make more sense to hold onto your home for a while longer. Consider these three factors driving this market: interest rates, housing supply, and housing demand.

1. Interest Rates

Mortgage interest rates remain near all-time lows, which essentially allows buyers to purchase more homes for the same payment. Rates will likely tick up in the coming years, but no one anticipates a surge. The Fed has said as much

2. Housing Supply

Inventory is at half the level of a year ago. If supply does increase, it will likely take months to be meaningful. Building materials are up as much as 300% over last year, and so are builder's prices. It is unlikely we will see major inventory increases soon.

3. Housing Demand

In terms of demand, there are signals it is pent-up based on the number of homes entering bidding wars that drive prices even higher. When the neighbor's house enters a bidding war, the value of your house goes up as well.

With these three factors being in play, home prices will logically continue to rise. If you sell now, you will almost certainly lose out on the appreciation in value you would see if you hold on to your home.

The good thing about real estate is unlike stocks that change in value day-to-day, real estate values and market shifts generally take months or years to play out. To know when it is time to sell, watch inventory. As inventories fall, prices go up, like today's market. When inventory stops falling or holds steady near a multi-year low, that will be a signal that it is time to sell. Even for a few months beyond the change.

Whatever You Choose, Work With A Real Estate Professional

Whatever you decide to do, whether it is selling into this market or converting your current home into an investment property and renting it out, the best course of action is to work with a professional real estate agent or REALTOR®. They can help you make sense of your options. A REALTOR® can help you market your home to get the maximum return or work with you to find a renter. Then, when it makes sense, they can help you prepare and list your home for maximum return!

Your real estate professional understands the local market and can help you to navigate through the current complexities of this seller's market. If you are looking to maximize your home's value, talk to your local REALTOR®!