Thinking About Selling Your Home? Now’s The Time!
Home prices have surged over the past two years. But those price increases seem to be slowing down. And new developments like tougher mortgage rules, growing inventory and rising interest rates may mean that – if you’ve been thinking about selling a home – now’s the time to do it.
Home values have been going up so much, why shouldn’t everyone just hold on to their home and let the value keep going up? The thing is home values are not going to continue growing the way they have. Over the past two years home prices have grown by about 20%. But that’s clearly not normal. If home prices continued to grow that fast pretty soon none of us would be able to afford a home.
Much of that growth was due to fewer distressed properties dragging down the market and low inventory – oftentimes driven by investors. Those are no longer as significant factors so we can expect home price growth to slow down. For 2014 we’re expecting to see between 4 and 5% price growth, around 3.8% for 2015 and by 2018 growth should be back to more normal levels of about 3% a year and prices should be back to about where they would have been had the bubble not occurred bubble. So, particularly if you’re an investor and you’ve been buying or owning homes in order to cash in on those big annual appreciation numbers, you need to start thinking about less annual appreciation moving forward. And if you can earn better returns on your money than 3 to 5% over the next few years, then now may be the time to sell and do just that. But also if you’re a homeowner ready to down size, now may be the time to sell for much the same reason – you can take that extra cash and invest it elsewhere, potentially for a higher return.
Other factors to consider? Until now we’ve had a seller’s market due to low inventory and high demand. But that’s changing. For example, normally about 1.5 million new homes are built each year. But when the bubble burst, building stopped and has been very low for several years. Now we’re seeing new homes being built again and added into inventory at the rate of over a million this year. Institutional investors have bought over 200,000 homes over the past few years. At the same time wages and job growth is still slower than expected. New mortgage rules and higher rates are having an impact too. Of the 2.1 million new households that will be formed over the next 2 years, 1.2 million will be renters. All of these things mean that there will be more homes available and potentially fewer people wanting them which can lead to more of a buyer’s market. Anyone who has been thinking about selling may want to do so before that happens so that you can sell more quickly, easily and for a higher price.