Wondering if you should sell your house now or wait? The answer is: maybe.
There are plenty of scenarios that make selling your home necessary – whether it’s to move across the country to be closer to family, because you need to downsize or you can’t afford mortgage payments anymore. But when your timeline to move is flexible, you likely want to try to strategize over when and how you place your home on the market to find buyers, maximize profit and make it easier to buy a new home, if that’s what you’re doing next.
In 2023, homeowners can expect to see a different market than they witnessed in the early years of the pandemic with rapidly rising home prices, or even in 2022’s depleted demand due to high interest rates. While 2023 may see a recession, interest rates are expected to stabilize and some buyers are expected to return to the market. Buyers who have been in their homes for at least a few years can expect to see that their property value has grown – though it may look less thrilling than the peaks of 2021.
If you’re on the fence about selling, you have a few choices: You can put your house up for sale to take advantage of current low inventory (even with lower demand), you can wait to see how interest rates and inflation play out as they relate to housing or you can opt to stay in your current home for the foreseeable future.
Here are three reasons you shouldn’t sell your home in 2023, along with three reasons it’s a good idea to make the jump in the next 12 months:
- Wait to sell: You bought or refinanced in the last couple of years.
- Wait to sell: You’re worried about affording your next purchase.
- Wait to sell: You’re worried about finding your next home.
- Sell in 2023: A high interest rate doesn’t scare you.
- Sell in 2023: You’re OK waiting for the right buyer.
- Sell in 2023: You need to move.
If you’re one of the many homeowners who have moved or refinanced in the last few years, there’s no reason to consider selling your home in the immediate future. Hopefully, your mortgage has helped ease any financial woes with low monthly payments. Ahead of 2022, many homeowners were able to lock into mortgage rates below 3%, which makes selling any time in the near future far less attractive. Unless other factors are making a move necessary, enjoy the low interest rate you locked in and continue to build equity in your home. Mortgage rates appear to be on a decline after reaching a peak at 7.08% for a 30-year, fixed-rate mortgage in November, according to Freddie Mac. As of Dec. 15, Freddie Mac reported the average interest rate for a 30-year, fixed-rate mortgage was 6.77%. But if you managed to secure an interest rate below 3% – or even 2%, for some homeowners – you’ll see little incentive to more than triple your interest rate for a new home. “The carrying cost on a new home purchase is going to be high relative to a person’s income compared to two years ago, three years ago and even beyond,” says Jason Pride, chief investment officer for private wealth at Glenmede, a wealth management firm headquartered in Philadelphia.
Over the course of the last couple of years, worries about affording your next home purchase were tied to the housing market’s rising prices and lack of new homes for sale. Now, add interest rates over 6% to the mix, and there seems to be little financial benefit to buying a new home. Don’t be afraid to wait to sell your home if you think the timing isn’t right. Even with plenty of home equity, you may find that your buying power is diminished when you factor in how much more you would have to pay toward interest each month. “That’s a tough financial calculus, and that’s keeping the more discretionary sellers out of the market right now,” says Lisa Sturtevant, chief economist for multiple listing service Bright MLS. If you can’t afford the home you would want to have next, it makes sense to wait to put your house on the market.
The market is more balanced than it was in 2021 or even in the first half of 2022, but housing inventory still remains low. With would-be buyers opting to pull back, houses sit on the market a bit longer than they did before. “Your best plan is to just be patient and wait to make a decision,” Pride says. Shopping for a new home is easier than it was in 2021 because you’re less likely to have to compete with multiple offers and bids well above the asking price. But more than 37% fewer homes sold in November 2022 compared with November 2021, according to Redfin, and that’s not exclusively from lack of demand. With fewer homes on the market to choose among, you may struggle to find the right number of bedrooms, ideal location or overall feel that will make you willing to take on a higher interest rate. Sturtevant points out that one factor additionally contributing to the sharp decline in home sales is that the real estate market is returning to some of the traditional seasonality for home sales. Approaching the end of the year, many people will opt to pull their home from the market or stop shopping until after the holidays have passed. Still, she says interest rates remain the major reason people are opting not to buy or sell now.
Mortgage rates reached higher levels in 2022 than in recent memory. For many homeowners, that’s enough to opt to stay in their current house. For others, the interest rate isn’t as much of a concern. “Mortgage rates seem to be on the way down, with inflation having already peaked,” says Orphe Divounguy, senior economist for Zillow. But the downward slope of mortgage interest rates at the close of the year gives many hope that rates will stabilize in 2023 – if at a higher level than they were in 2021. If an interest rate in the 5% or 6% range doesn’t scare you, a new mortgage after you sell your current house isn’t reason to stay put. Plus, at the end of the day there is no way to perfectly time the market. If you can afford to move and want to move, selling your home in 2023 may be the best timing when there’s no way to know what’s ahead in 2024 and beyond.
There’s a lot of discussion about buyer demand dropping as high home prices and high interest rates put pressure on affordability across the U.S. However, the U.S. is still seeing positive home price growth. The median home sale price in November was $393,977, according to Redfin, which is a 2.9% increase from November 2021. “If you are selling your home at an appropriate price reflecting conditions, we’re finding that there are still buyers out there,” Sturtevant says. Where sellers will notice a difference is the amount of time a home sits on the market. A year ago, multiple offers on the first day a home hit the market were common. Today, there are fewer offers and at a more leisurely pace. Redfin reports homes had a median of 37 days on market for properties in November, 15 days more than November 2021. Of course, 37 days is much more in line with the housing market prior to the COVID-19 pandemic, Divounguy says. Sellers can’t expect bidding wars and multiple all-cash offers, but they can expect their property’s value to have grown.
If you need to move for any reason, it’s still possible to sell your home and find a new one. If you lost your job, you may be worried about your ability to continue to pay your mortgage. If that’s the case, selling may be a valid option. But plenty of others are opting for a life change that involves moving to another state, more room for a growing family or a bigger footprint needed for permanent work-from-home space. A profitable sale and purchase of a new home is still possible – but proper preparation and realistic expectations are key. Divounguy advises sellers to work with experienced real estate agents to avoid pricing a home too high. “Compared to a year ago, there are still plenty of gains there as a seller,” Divounguy says. Additionally, change in conditions can open doors for buyers to come back to the market – particularly if mortgage interest rates shift down further and if inflation continues to decline. “Buyers are waiting in the wings for affordability to improve,” Divounguy says.
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