by MITCH DIETZ
As we shared a few weeks ago, our local inventory of homes is at a 7 year low. With these historically low numbers, more and more sellers are asking, “is now the time to sell?”
The answer to this question depends on a great many factors. For some, this is a perfect time to sell, while for others it might be worth waiting. However, we can say without any hesitation, for anyone looking to sell these are the conditions owners look for when entering the market.
To the extent generalizations can be made, trade-up sellers are in a particularly good situation. Trade-up sellers are those looking to move from a current home to a more expensive property, whether it is a larger home, one with special amenities, or a superior location.
Whatever the reason, these sellers stand to benefit by moving in this market. There are two parts of the equation for these trade-up sellers: the sale of the current home and the purchase of the next home.
On the sale side, sellers over the past six years have worried primarily about two things – falling prices and lack of buyer interest. Buyer confidence has returned now that prices have dropped. With more and more buyers coming back to the market, prices are no longer falling, and in many cases are now rebounding. Sellers today are now finding buyer interest that wasn’t there even just a year ago, the market has really turned in that regard. So on the selling side of the equation, there is no longer the concern there once was.
Even with these great conditions many sellers still feel that they should wait for prices to bounce back up before making the next move. That can certainly be true for some sellers, but no so for the trade-up seller.
On the purchasing side of the equation is where savvy trade-up sellers are focusing. Typically, people trading up buy a home that is 50% greater in value than the home being sold. For example, a person who owns home currently worth $200,000 and is interested in a new home that costs $300,000. By waiting for the market to rise 5%, the owner can sell for $210,000 or $10,000 more than today’s value. However, the price on the next home would rise by $15,000 (5% of $300,000). By waiting to sell, this person will spend $5,000 more than making that move today.
One other factor on the financial side, of course, is interest rates. Buyer’s today are seeing crazy low interest rates. Waiting to buy the next home will not only cost more on the purchase price, but as rates rise purchasing power decreases. For example, the principal and interest payment on a $300,000 loan at 4% interest (30-year fixed-rate) is about $180 per month cheaper than at 5% interest.
Trade-up sellers are certainly in great shape to take advantage of today’s market conditions. Other sellers, however, may benefit by waiting to sell. There are, of course, many other considerations in a move beside just the financial consequences. In any market, but especially fast moving ones as we are currently experiencing, it is important for buyers and sellers to have smart, trustworthy advice. To learn more about buying or selling, today or in the future, contact one of our sales professionals. We’d be happy to explore if now is the time to make your next move.
