Timing the Real Estate Market: Should You Sell Your Home?
You only have to watch the news on TV to hear about how high home values are today. In many areas of the country, home prices are at record highs, and this leaves many homeowners wondering if now is the right time to sell their home. Many of these news stories talk about the real estate market reaching its peak, and they feature economists projecting real estate values to decline. By selling your home today, you could lock in today's property value and sell your home for a sizable profit. However, if property values continue to rise, selling now may mean you lost out on the chance to enjoy an even greater profit later.
Expert Insight and Analysis
There are numerous factors that experts use to analyze the real estate market and create a market forecast. These include factors such as ratios regarding housing prices compared to rents and housing prices compared to income as well as historically high property ownership levels. Many experts believe the market has reached its peak and that prices will fall within the next few years. Some believe that housing prices, which have been on the rise since the early 2000s, may experience a double-digit decline soon. While such projections and forecasts are based on factual analysis of real estate market data, they are simply projections. Timing the real estate market can be difficult. However, the failure to act now may result in homeowners losing the ability to profit from the currently high market values.
When You Sell Your Home
One factor to consider when making the decision to sell your home is where you will live after the sale is finalized. While you may profit from the sale of your current home, you also may be considering purchasing a new home at a historically high value. If market values decrease in the coming years, you may wind up losing money on the purchase of the new home. If real estate values do experience a double-digit decline, as some economists predict, your loss may be significant and may create a situation where you are upside down on your home mortgage. If you buy a new home today, can you afford the mortgage payment on the home based on today's values? Will you be forced to downsize, or do you need to downsize?
The Alternative of Refinancing
If you are simply considering selling your current home to recoup equity, you may consider the alternative of refinancing. Depending on the rate you qualify for and the amount of equity in your home, you may be able to recoup equity without increasing your mortgage payment. For some homeowners, refinancing may also allow them to pay their mortgage off more quickly. By refinancing, you can continue to live in a home that meets your current needs and have more control over your mortgage payment. If home prices do increase even further in coming years, you can then consider the option to refinance again later or to sell your home at a later date. Once your home is sold, your ability to further profit from the increased property values is eliminated.
Making Your Decision
The fact is that it can be difficult to determine whether the real estate market will become stagnant at current values, will continue to increase or will decrease in coming years. While you may have considerable equity built into your home due to the rising market values, the first consideration to make will be your living situation. Consider if you need or want to move, and if you can afford to find affordable alternative housing. If not, the best option may be to refinance your home if you want to take equity out of your home. Equity can be used to pay down debts, add on to your existing home, put the kids through college and more. So while your living situation should be a primary consideration, the factor of the equity built into your home should also be considered carefully.
For homeowners who want to explore their specific options in more detail, it may be beneficial to talk to a local real estate agent about the market value for their home. This can then be compared against financing options for a refinance home loan. While many homeowners are considering if now is the right time to sell, there is no right answer for everyone. Each homeowner will need to weigh the pros and cons of selling versus refinancing or maintaining the status quo on an individual basis.