Real estate brokers and agents are an optimistic bunch. If you ask 100 of us this question, 99 are likely to respond with an enthusiastic “Yes!”. Logic and the basic rules of economics suggest that it can’t always be a great time to sell. So what gives?
Is This a Good Time to Sell Your Home?
Well. No. (But maybe yes. It depends on your goals.)
Today is Not the Best Time for Most of Us to Sell Our Homes.
I believe the majority of us should sit on the sidelines for a few months more, and this belief rides on the shoulders of numerous economists.
There are still buyers in the market and homes selling for multiple offers, and well over the list price! However, for those of us who don’t own one of the more special homes in a traditionally high-demand neighborhood, the reality is that things have been better, and will be better again. The sexiest houses may still have enough pull to attract buyers who are relatively unaffected by these market pressures but – between high-interest rates, layoffs, and overall market jitters – there just are not enough buyers to gobble up a large number of houses at the same competitive and appreciating prices as we’ve gotten used to over the last decade. You may want to wait until there are more “hungry” buyers in the market so that you can benefit from the kind of market competition that produces the strongest sales prices for Bay Area homes.
The good news is that the Fed is expected to maybe enact one more smaller interest rate hike. Just one more. I like to picture each of these interest rate hikes as being equivalent to someone turning down the thermostat. The stock market and public sentiment (buyer optimism and willingness to take on new debt, such as a new home mortgage) generally cool down each time the Fed turns down that dial. Once the Fed takes its hand off the thermostat, the stock market and public sentiment have tended to quickly rebound. Investors feel they know what they’re dealing with. The uncertainty is gone. They can make informed decisions. So they jump back into the market. Public sentiment follows right behind all of this, and the real estate market has historically rebounded very quickly. Assuming we follow that historic pattern this time, it seems likely that public sentiment will rebound in the next few months, once the Fed finishes cooling off the market.
All of this suggests that homebuyers will soon be coming out of the woodwork. There is no better time to sell your home than when homebuyers are rushing back into the real estate market, eager to snag a home, but before every other seller has gotten their home onto the market to meet that great new demand.
More good news: When the real estate market shifts, it tends to shift very quickly. As a broker working “in the trenches”, I can feel the market temperature shift literally from one week to the next, depending on what happens with one mortgage program or one piece of interest or employment news. The shifts are quick and dramatic. Bay Area real estate is simply too sought-after and the housing supply is simply too constrained for things to stay “down” for too long. Give the buyers the ability to buy (by lowering interest rates and producing a stable employment economy) and they will get out there and buy.
Today is a Good Time to Plan and Get Things Lined Up for Your Future Sale!
While this may not be the perfect time to sell, if you have any thoughts of selling in the next 6-12 months, this is the ideal time to plan and strategize for that sale in the recovered market – predicted to arrive in summer or fall 2023. Right now, you’ve got a perfect opportunity to take care of those items on your to-do list, to tackle house maintenance, gardening, painting, and other beautification tasks, and plan for a quick launch onto the market once the economy has found its feet again. Your ideal sale time will come when the buyers have regained their courage and come back into the market, but before lots of other listings are crowding the market and competing for those buyers’ attention. By being ready for that market, you’ll be in the enviable position of getting your home onto the market before the tidal wave of competing listings comes onto the market. As one of the first homes on the market, you’ll have the largest pool of buyers to work with.
Wherever your thoughts and plans take you, if you are even idly musing about selling your home in the next 6-12 months, please reach out to me! I’ve been through the home preparation and sales processes repeatedly for more than a quarter of a century in this business. I can sit with you to assess the market. I can evaluate and guide you on how to highlight your home’s greatest assets without over-investing in pre-sale projects. I can plan, prepare and coordinate your pre-sale touch-up tasks to minimize stress for you. I can connect you with my team of trusted, independent contractors and other home service providers. I can walk you through your “next steps” and prospective home marketing and sale timeline. With a well-planned and executed strategy, you will be ready to make the most of the good market when it arrives and you choose to make your move.
And Yes, This is a Good Time for Some of Us to Sell.
1. Those with a lot of equity, and a compelling life or location change on the horizon, shouldn’t feel chained to their home: Anybody who has lived in a home for a long time and has a desire or need to move out of the Bay Area or take their life a new direction, should seriously weigh the pros and cons of selling now versus waiting. We’re coming out of more than a decade of rapid price increases across the Bay Area. If you’ve owned a home for a considerable period, you’re going to have a tidy pile of equity in your property. If you want to move out of the Bay Area to retire in another state, you may find that your current sales proceeds will be more than ample to land you in the place of your dreams in your new location. What value do you place on postponing your dreams? Is there a benefit to buying in your new market area sooner rather than later?
2. Anybody who’s planning on selling and then immediately buying a replacement property should do just fine: This is the time to take advantage of the drop in buyers competing over every single listing. You may get less out of your sale in this slower real estate market but you’ll also get to pay less for your replacement home, as long as that home is in a neighborhood with equivalent market impacts and demand. You should be able to buy at the same lightly-lowered price as you are selling at. Your property taxes will be set according to your slightly lowered new purchase price, so you’ll reap that benefit (compared with buying in a more heated market). If you’re taking a loan at 6.5% for this purchase, you’ll be able to look forward to refinancing at lower rates when the financing market calms down a bit. And you’ll be buying that replacement property in a less intense buyer market than we previously experienced (and will experience again, once the market regains its strength). If you’re just looking at upsizing or downsizing in the same market, why wouldn’t you want to take advantage of the reduced buyer competition to get yourself installed in the new home of your dreams?
3. Other homeowners may prefer to work within the realm of today’s certainty, rather than waiting for potential market shifts: If you know you can recoup enough money off a current sale to finance your next step, consider the value of working within that certainty – selling today and collecting that return – as opposed to taking a gamble that you can get an extra (and undefined) amount of money on your plate in 6 (or 12? or 18?) months. Keep in mind the cost of paying your regular mortgage and expenses and maintaining your home for those extra months, as you wait for the market to improve. Also, keep in mind that any additional sales proceeds you do get will be taxed; those extra proceeds won’t all be pure profit. What is your risk tolerance and what value do you place on financial certainty?
What About the Media?
This is almost off-topic, but since the media often has a profound influence on our market behaviors – our decision to buy or sell a home, for instance – it does deserve a few paragraphs. What does the news tell us? The media loves broadcasting spectacular news. Unfortunately, nothing is more spectacular and attention-getting than disaster, fear, and misery.
When the market is hot, and sellers are besieged by buyer offers $1M over the list price, the headlines crow about how terrible the home-buying experience has become for buyers while the sellers are happily putting aside retirement funds and enjoying unprecedented returns on their investments into their homes. When the Federal Reserve starts raising interest rates, the media focuses on the crazy high-interest rates. (Keep in mind that they are currently running in the 6% range, a full 10% lower than they went in the 1980s.) Reports of the collapse of the real estate market pop up all over the place even though there are still multiple-offer sales going on throughout the Bay Area.
Remember that the media is always looking backward and looking for the attention-grabbing story. Don’t let it get you down. Trust the data, and remember that your specific goals and the context around your home sale or purchase decisions are just as important as the real estate economy. There are very successful purchases and sales completed in every market. This market is no exception.
