Is now a good time to sell, or should I wait?
"Now is a great time to buy or sell real estate."
When I first heard this chestnut in a training class years ago, I mentally crawled under my desk. It sounded more like sales hype than market wisdom. How could now always be a good time to buy or sell?
But I was missing the point: carpe diem. "Seize the day".
I got that point big time when I started hanging with good old reliable real estate. What a brick. Then I started noticing that, uh, real estate wasn't all that reliable. One day it would be swinging from the chandelier. The next, it wouldn't come out of its room. Every mood swing cost either buyers or sellers big money and frustration.
What's up with that?
Answer: if now is a good time, or even just an okay time, don't wait for the perfect time to put your house on the market. Now is a great time to buy or sell real estate. Now I get it.
Now is one of the best times to sell in years, at least in the entry-level and mid-range markets. But this could change and inevitably will, as real estate moves toward a balance between seller and buyer. You don't need a crystal ball to see this. In this area we're not in a bubble, but we are in what almost certainly is the last few moments of one of real estate's periodic up-cycles. Unless the lending industry's creativity has permanently suspended the laws of real estate, "down" is most likely the next direction we'll go. Even "sideways" would be fine.
Interest rates should creep up, and at some point buyers will stop compensating for that with riskier, lower-interest rate loans. Even if they don't, lenders will start drawing back from the market as they see more risk; some already have. Buyers will gradually retire to the sidelines, voluntarily or otherwise. Fewer buyers will mean less competition between buyers. Less competition will mean lower prices and more negotiation on terms.
An improving economy, either nationally or locally, may counterbalance this scenario by creating wealth and jobs and encouraging consumer confidence. But seller's markets don't last forever, and this one is long past its "best if used by" date. A slower market won't necessarily be catastrophic for sellers, but it will mean fewer dollars and more frustration.
How low prices will go depends on where rates end up. Even at 8 percent, a two-point rise as this is written, rates would still be low by historical standards.
It also depends on the price range. We could probably lose half the entry-level buyers and see a minimal effect on prices at that end of the market. The pool of entry-level buyers is huge. Some of them are just going through the motions, and their absence would have little impact.
Above $1M, stock market wealth plays a bigger role in home sales than interest rates. A more consistent performance from Wall Street—or a more appreciative audience for the good things Wall Street is already doing—could prop up demand in this price range.
But for the majority of homes, higher interest rates should slow demand. It probably won't be a bad time to sell, but it won't be the fantastic time it is now.