By Chris Taylor
NEW YORK (Reuters) – For the past few years, Lee Adler kept track of the U.S. real estate market, and things just kept going up – and up.
So it seemed an optimal time to sell his stateside home after Adler moved abroad to Nice, France, shortly before the pandemic began. His single family house in West Palm Beach, Florida sold within a month.
“I felt that I was in the driver’s seat,” says Adler, 71, who publishes websites like Liquidity Trader and the Wall Street Examiner. “I got a cash offer with no contingencies at my asking price. The selling price was 40% higher than I could have gotten a year ago.”
The sizzling housing market may not be great news for buyers, but it is terrific for sellers. The S&P CoreLogic Case-Shiller Index recently reported national home-price gains of 18.8% for 2021, far outpacing even red-hot inflation numbers.
For owners who have been hemming and hawing about whether to sell, it might be time to strike. In fact, the Realtor.com website has a very specific suggestion about when to list: The week of April 10-16.
The current mix of eager buyers, scant listings, healthy prices and mortgage rates that are still relatively low (historically speaking) means a lot of factors are tipping the scales in sellers’ favor.
“Mid-April will put sellers in the market just ahead of a big surge in listings in May,” says Danielle Hale, chief economist for Realtor.com. “That way they will be able to capitalize on a large buyer audience who haven’t been satisfied with the homes available for sale.”
Looking ahead, there are many reasons to believe the current market will cool off. Higher interest rates affect housing affordability. Average monthly mortgage payments are already much higher than they were just a couple of months ago, says Hale.
If regular buyers cannot afford as much per home, investors – who comprised a record 18.4% of the market in 2021’s 4th quarter, according to real estate brokerage Redfin – likely will not be quite as interested either. Current projections for 2022 home-price growth are a more modest 2.9%, says Hale.
“This year buyers came out early to get ahead of rising mortgage rates, so now is an excellent time to sell,” says Daryl Fairweather, Redfin’s chief economist.
Some thoughts about striking the right deal:
TAKE ADVANTAGE OF THE SPRING RUSH
Spring is the busiest season for buyers and sellers: Parents do not like to move families after the school year gets underway in the fall, and many people – especially in colder climates – are not fans of moving in winter.
“Get started right away, because there are probably improvements you want to make to make sure your home is in its best light,” advises Hale.
PRICE IT RIGHT
Your eyes may be big with dollar signs right now, given the huge real estate market gains of recent years. But if a home price is too high for the market, and it sits around for a while, then it becomes stale. Thus the ongoing rise in interest rates could come back to bite you.
A better strategy is to “err on the side of caution and underprice it, because well-priced homes are getting multiple offers right now,” Fairweather says. “But if mortgage rates move higher next week, there is a real risk if you are overpriced and the market turns.”
USE YOUR LEVERAGE
All real estate is local, as the adage goes. If you are in an area where demand is high and inventory is low, that works in your favor when it comes to setting the deal’s terms and conditions.
Around 15% of deals right now have waived contingencies for issues like inspections or financing, says Fairweather – a much higher level than before the pandemic. Deals are also closing quickly, about 17 days faster than the same period last year, says Hale.
THINK ABOUT NEXT STEPS
Even if you sell at a great price, the reality is you are still going to have to live somewhere. And rents have been rising sharply too, right along with housing prices.
As a result, a big move makes the most sense for those who are doing some real estate arbitrage: Perhaps an empty nester who is downsizing, or someone taking advantage of the work-from-home trend to lower the cost of living.
“The real winners in this housing market are those who are selling in an expensive area, and moving into more affordable homes,” Fairweather says.
(Editing by Lauren Young and Karishma Singh; Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance.)