The Market is Hot, but Are You Ready to Sell?
The year 2020 brought with it a decade’s worth of events in less than 12 months. Between the Coronavirus pandemic, the murder hornets, and the Biden/Trump presidential election, we’ve been through it all this year.
2020 also threw us on an unanticipated economic roller coaster. We saw unemployment rates and the stock market both hit all-time highs in a matter of weeks. Interest rates, meanwhile, are at record lows, heating up the housing market and making homeowners everywhere ask the question, “Am I ready to sell my home?”.
According to Redfin, the median price for four-week home sales is up 14.9% from 2019. If you look at that number in isolation, you might think there is no better time than now to sell your home. And while you may be right, here’s a few more questions you should consider before getting on the phone with your realtor:
Why do you want to sell your home?
The first question to ask yourself when considering selling your home is this: Why do you want to sell?
Have you grown out of your current home? Are you relocating to a new, less expensive part of the country? Are you working remote and, thus, making the switch to renting rather than owning for added flexibility?
Or do you just want to sell because you’ve heard the market is hot and the asking price for your home is higher than ever?
If it’s been a while since you sold your last home, or if you’re looking at selling a home for the first time, you might forget how big of a process it is and some of the costs involved. So, if the only reason you’re looking at selling is because of a hot market, the better option might be to hold off for now.
If the market is hot and you have a concrete reason to be selling, then there’s no better time to get your house on the market.
How much equity do you have?
Home equity is how much of your home you actually own. If you buy a house entirely in cash, for example, you would own 100% equity because you aren’t paying off a mortgage loan to a lender. On the flipside, if you take out a mortgage to pay for a house (a much more common option than paying cash), you would own a small piece of your home and build equity as you repay your loan.
An easy way to calculate your home equity is by taking the market price of your home and subtracting the remaining balance on your home loan, like this:
Market Price - Remaining Loan Balance = Equity Amount
Using this to calculate your home equity, you can make a better decision as to whether or not it makes sense financially to sell your home. One common piece of advice is to wait to sell until you have enough equity built up to put a down payment of at least 20% on your next home.
If you don’t have enough equity in your home to justify selling, there are other ways to take advantage of a hot market. Refinancing with a new lender gives you a chance to capitalize on low interest rates without having to go through the process of selling, buying, and moving.
Are you emotionally prepared for a move?
Moving is no small feat. It takes days to pack everything neatly in boxes, throw away and donate to charity all the things you forgot you had and now don’t need, load up a truck, and then unpack everything in a new place.
That alone is enough to drive a person’s anxiety and stress levels up a few notches. On top of that, you also have to go through the process of staging your home for open houses, coordinating with your agent when potential buyers want to walk through the property, and negotiate a max-dollar offer. Oh, and don’t forget that while you do all of that, you also have to find a new place to live.
A lot of people hear the market is hot and immediately get on the phone with their realtor to post a listing. Instead of doing that, take some time to really think things through and ask yourself if you’re emotionally prepared to move.
If the answer is no, you’d be better off not selling. Your mental and emotional health are worth more than the money you’ll make, no matter how hot the market.
With all of that said, it’s unlikely that interest rates will stay at record lows for long. So if, after weighing the pros and cons, you decide that selling is what’s best for you, act fast. The housing market is notorious for changing with little warning, so strike while the iron (and the market) is hot.