Whether you're a real estate investor looking to free up cash by selling an income property or an everyday homeowner, the timing of a home sale is important. That's because it could dictate how much money you come away with.
If you're thinking of selling a home, you may be wondering if you should move forward now or wait another year. But based on what we know about the housing market, as well as the economy in general, it's pretty clear that selling now is your better choice. Here's why.
1. Low inventory could work to your benefit
The U.S. real estate market still doesn't have enough inventory to meet buyer demand. The National Association of Realtors reports that as of the end of October, there were 1.22 million homes available for sale. That represents a mere 3.3-month supply. For context, it often takes a six-month supply of homes to satisfy buyer demand.
Furthermore, the inventory of homes has actually slipped for three months in a row, and we don't know when that trend will reverse. That's just one reason it pays to put a listing together for your home now.
If you sell at a time when there isn't a lot of competition, you might manage to command a higher asking price because buyers won't have many other options to seek out. If you wait a year, housing inventory could pick up substantially by then. That could mean more competition and less negotiating power.
2. Rising mortgage rates could push buyers away
These days, the average 30-year mortgage is hovering around 7%. Sure, we might see some occasional dips back into the 6.5% range, but all told, borrowing rates are high.
That doesn't mean mortgage rates are done climbing, though. The Federal Reserve recently doubled down on its plans to continue raising interest rates to battle inflation, which could indirectly drive mortgage costs up. And if borrowing for a home gets more expensive, a large number of buyers might pull out of the market, due to affordability issues. That's a situation you'll want to get ahead of.
3. A recession could force buyers to put their plans on hold
For months on end, experts have been sounding recession warnings as inflation and other factors converge to paint an unfavorable economic picture. If a recession hits in 2023, it could result in widespread unemployment. And that could force more buyers out of the market, thereby narrowing the gap between supply and demand.
Plus, would-be buyers who are gainfully employed during a recession might still opt to hold off on a home purchase to play it safe. So you don't want to wait for economic conditions to deteriorate to sell your home, which is why you should act now.
Selling a home is a big undertaking. But waiting a year could put you in a far worse position. If your goal is to maximize your profits, it pays to put your home up for sale sooner rather than later.