Selling in a Hot Market
Selling Your Home in a Hot Market... Is it right for you?
Our last two blogs have covered ways to capitalize on increased home values through a cash out refinance or a home equity line of credit. The final way to take advantage of increased home prices in the Charleston area is the most obvious….It’s to sell that home! Selling in a hot real estate market could be a great strategy for some, but a not-so-great strategy for others. Let’s break it down.
From September 2020 to September 2021, home prices increased by 19.5% (according to the S&P CoreLogic Case-Shiller Index). That means a house worth $300,000 a year ago on average would now be worth $360,000 today. Who wouldn’t want an extra $60,000 in their pocket?
The increased home values have led many homeowners to be tempted to sell. The thought of profiting and walking away with so much money is super enticing. Who’s the perfect candidates for this? And on the other hand, who is not the perfect candidate? Well, let’s see.
Who may not benefit from selling their home as much?
The first thing to consider is whether you will be purchasing a new home. While you may be excited to pocket all the extra cash from the sale of your current home, you’ll also be paying a premium on your new home. The bad news is, that since housing prices are increased across the entire market, the price of that new home will cost you more and it may “cancel out” any extra profit from your current home.
However, while you may pay a premium for the new house, there is potentially benefits of selling your home now even if you are purchasing a new home. Those looking to upsize or upgrade their home can use the cash from the increased equity in their current home as a down payment on their new home. With interest rates still low, using the cash for a large down payment may enable you to keep your house payment similar to your current mortgage while being able to afford a more expensive home.
Who may benefit? - Those looking to downsize or who simply want a change
Many people in the market to buy a home are looking to upsize. They need more space for their growing families or just growing belongings. We as Americans, often strive for bigger and nicer things and housing is no exception. On the contrary, there are some individuals with whom downsizing might be a good fit.
Empty nesters are a great example of those may benefit from selling. That five-bedroom home was great when you had three school age children, but once they are all out of the house and off to college, jobs and the real world, do you really need that much square footage? It’s more house to heat and cool and my personal most dreaded task…to clean. It would be an ideal time for empty nesters or anyone seeking to downsize to sell their current home and purchase a smaller and potentially less expensive home.
Those who have recently retired may be another great candidate for downsizing their home. After retirement, retirees often look to minimize their housing costs and many are interested in communities or areas with more recreational amenities to enjoy with their extra free time. This would be a great time to make those changes and look for new homes that will fit your retired life better.
And lastly, those who may benefit the most from selling their properties in this current hot market are investors. This of course includes big time corporate investors, but we’re going to focus on the smaller private investor. Some investors hold properties for cash flow or the rental income, while others hold them until the value increases and then they sell for a profit. Either way an investor can’t go wrong selling right now if cash is their goal. The perfect investor who will benefit the most is the investor who owns a few rentals and are just tired of being a landlord. Why not sell while rental prices and home values are the highest they’ve been in recent years? You’ll get a premium for that property. It’s a no brainer.
To summarize, at first thought, selling in a hot real estate market seems like a great idea for everyone. However, there are some who may benefit more than others and some who may not benefit much at all. The decision to sell often comes down to many factors; price and market conditions just being two of them. If you are considering selling your home in the current market, let Home Grown Real Estate provide a free market analysis to get an idea of your home’s value. This will enable you to weigh your personal pros and cons of selling. Lastly, always speak to your financial or tax advisor when making big decision such as this as they are the experts on what financial and tax implications may arise from selling your home. But if selling is in the cards to you, Home Grown Real Estate would love to assist you in listing, marketing, and closing that sell so you can move on to bigger and better (or maybe smaller and better) things.
