Home sellers may be facing a closing window in today’s still warm — but cooling — real estate market.
While sellers can still take advantage of low inventory, they should also be aware that inflation, rising interest rates and perceptions of overpriced homes may take some of the breath out of the seller’s market.
There are also signs that homes are slowly but steadily staying on the market longer, creating a difficult choice for prospective sellers: Are you betting that your local market remains in sufficient demand to attract overpriced offers, or are you holding tight and waiting for the next big wave up?
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Warning signs for sellers
Elected leaders often joke that all politics is local. This also applies to real estate.
In-demand cities and neighborhoods will always defy broad national trends. Things like quality schools, living conditions and access to cultural amenities will always help home sellers get the best bang for their buck.
But the latest numbers are hard to ignore.
Redfin’s homebuyer demand index — which measures requests for home tours and other home-buying services from Redfin agents — rose seven points in the last week of July, with mortgage purchase requests rising for the first time way for more than a month. But Redfin also said the improvements haven’t translated into sales so far.
The organization said pending sales fell in July and new listings fell 11 percent, the biggest drop since June 2020.
More pessimistic numbers were offered recently by Fannie Mae, whose index of home buying sentiment fell to its lowest level since 2011. Fannie Mae said consumers are pessimistic about home buying conditions and that the percentage of consumers, who believe it is a good time to sell has also declined.
Still, it’s a good time to sell
While many leading indicators may suggest we’re entering a cooling period, a handful of critical factors make now a good time to sell—assuming you’re willing to list:
Demand: Homes may be on the market for longer, but demand remains relatively high and housing inventory remains low compared to previous years. Some parts of the US remain in bidding war territory — Utah, Washington and Florida continue to see appreciation of more than 20% — where sellers can expect offers above asking price.
All cash: If you live in a low-inventory market and buyers outnumber properties, sellers can expect to cash out — sometimes literally. The an all-cash bid market is hot right now, which is great news for sellers because cash offers usually speed the path to closing.
Rising interest rates: While the Federal Reserve’s moves to raise interest rates could work against sellers — higher interest rates mean bigger monthly mortgage payments — the looming spikes are likely to prompt some buyers to lock in rates now before the next one expected Fed move. The average interest rate on a 30-year fixed mortgage it’s now around 5.35%, significantly higher than a year ago when rates hovered just above 3%.
A good time to wait
There are valid reasons for selling. But there’s just as much to hold on to.
Your Own Plan: What happens if your home sells quickly? Do you have a plan for the proceeds of the sale? Need to start the search for your new space?
Your new mortgage: If you’re selling because you need a bigger home, that leap may not be feasible, especially if you’re looking in a popular neighborhood or city. A new, larger property can absorb the profit from that just-sold property and still carry a larger monthly mortgage payment.
Interest rate hikes (again): These same Federal Reserve interest rate hikes can, of course, work against you as a seller because they will likely reduce the pool of potential buyers, making it harder for buyers with a conventional mortgage to afford your property.
Get good advice
Making a big real estate deal – as a buyer or seller – starts with a thorough due diligence. Why buy or sell and why now? Then take those answers to an experienced agent who knows your area.
An agent is usually your best compass for what your city or neighborhood will require or cost.
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This article provides information only and should not be construed as advice. Provided without any warranty.