Is it a good time to buy or sell a house?
Question:
“How do I know if now is a good time to buy or sell a house?” - Ron Garrow, Stowe, VT
Answer:
Deciding when to purchase your first home, sell your current home and purchase another or purchase a second or vacation home is best determined by your unique circumstances, desires and goals. Without knowing your specific details, I’ve listed a few items that I think would play a role in the decision-making process for the majority of buyers:
The Real Estate Market: Each individual state, county, city and even each individual neighborhood has its own unique market condition at any given time. States such as Texas, California and Florida are growing in population daily while others are slowly declining in population as companies, jobs and development have vacated. Many rural areas within each state are facing an exodus of youth as there is often limited career or business opportunities available to them.
As we continue to scale down geographically, we see that even smaller areas can often leap from one extreme to another. One neighborhood can be smoking hot while the one next door is cold as ice. It can even come down to individual streets and blocks as the level of desirability and prices can sometimes vary widely from one block to the next.
Price/Value
For the majority of buyers and sellers, this factor is often at the top of the list, at least in the beginning, when trying to determine if now is the right time to buy or sell. What is my current home worth and what will it cost me to buy another? The good news (or maybe the bad depending on your point of view) is that the two are often directly connected when buying and selling in the same market. Sure, the house you want may be much more expensive than it was a few years ago, but there’s a good chance that your house has appreciated in value accordingly, so the net result is the same.
If you’re selling your current home so that you can purchase another home, spend some time crunching the numbers and determine your “walk away” dollar amount on the selling side of the equation. This is the amount of money you would put in your pocket after selling your house and paying any and all fees including your mortgage, commission and taxes, etc.
Then do the same thing for the home you’re buying in order to determine the “out of pocket” amount you will need to cover the down payment, inspection and appraisal fees, loan origination fees, taxes, HOA costs, etc. How positive or negative you are when comparing the two numbers can play a big role in determining how you go forward.
Interest Rates
We all know about how important the interest rates are when it comes to purchasing a home? An increase in 1/10th of a percent can be life or death when it comes to being able to afford the payment, right? Or is it? Below is a chart showing the difference in payment amounts on a 30-year mortgage of $200,000 at different interest rates:
As you can see from the chart above, an interest rate increase from 3.5% to 4.0% on a $200,000 mortgage only results in a $57 increase in the monthly payment. So, while interest rates are certainly an important factor to consider, a small increase or decrease in the interest rate probably shouldn’t be the deciding factor in whether to buy your next home.
Return on Investment (ROI)
If you’re investor seeking to add real estate to your portfolio or expand upon your existing holdings, there are a myriad of factors, formulas and calculations that need to be considered when making the decision to buy or sell a particular property, the total of which goes well beyond the needs or wants of the average homeowner. I will be happy to provide more details in an upcoming Question of the Week.
Personal Situation
And now we arrived at the category that matters most of all. What is it about your unique personal situation that prompts you to ask this question in the first place? Is it job or career related? Have you had a recent addition to the family and need more space? Does it have to do with your health or the medical needs of a loved one? Maybe you’re tired of shoveling snow and want to move somewhere warm and sunny. Or perhaps living in the city is just too noisy and hectic and you need to be surrounded by quiet, open spaces. Or perhaps the opposite is true. Regardless of what the answer is, the most important factor in determining if now is a good time to sell or buy is you.
For more information on selling your house, buying your new home or investing in Central Florida’s amazing real estate market, please contact me - Brian Hayes, Realtor®