Why You May Not Want to Sell Your House Right Now -- Even if Your Home Value Has Gone Up a Lot

Home prices increased dramatically in many parts of the country during 2020 and 2021, and the median price was $431,000 in the third quarter of 2023, according to data by the St. Louis Fed. If you're one of the many people who has seen your home price climb rapidly, you may be tempted to sell while the market is hot and cash in your equity.

Before you do that, though, you should think about these two huge potential downsides of putting your home on the market and moving to a new place right now.

1. You may have a hard time finding a new home

If you are selling your home, you are almost definitely going to need a new place to live -- unless you happen to be moving in with family or friends. Unfortunately, buying a home right now could be really challenging.

Once you become a buyer, you're faced with the same high prices that pushed your own home's value up. So, while you may have sold your home for more money due to rising property values, you're also going to pay more to buy your next place.

Not only is this an issue, but you may also have a hard time finding a place you even want to purchase. While more homes went on the market in November 2023 than in 2022, this was the first time in four months that inventory was up on a year-over-year basis instead of down (according to Realtor.com). Despite this bit of good news, there were still 37.8% fewer homes on the market than during the 2017 to 2019 period.

There have been too few homes on the market for a while, ever since the COVID-19 pandemic wreaked havoc on the housing market. If there are not a ton of houses to choose from, this means home buyers may have to settle for an imperfect place if they can even find something to buy at all.

If you're picky about where you live or your primary hope is to cash out equity and find a cheap new home, you may come to regret selling. So before you move forward with listing your house, you may want to check what's available in your area to get an idea of whether there are homes you like that are priced reasonably.

2. You could get stuck with a much more expensive mortgage rate

There's another big issue if you try to sell your house. Unless you are paying cash for your next property, you are probably going to have to get a mortgage loan to buy it.

Now, if you got a mortgage in the past five years or so before April of 2022, the mortgage lender probably offered you a rate somewhere in the 3.00% to 4.00% range. And if you bought during the heart of the COVID-19 pandemic, your rate was likely very low and perhaps even slightly below 3.00%.

If you have to borrow now when rates have been hovering closer to the 7.00% range or higher, you are going to end up with a much more expensive loan. In fact, for each $100,000 you borrow at 7.00% versus 3.50% with a 30-year loan, you're going to end up paying $665.30 per month and $139,508.90 in total interest over time versus $449.04 a month and $61,656.09 in total interest costs.

Between paying a high price for a home you buy, perhaps having trouble finding a new home, and getting stuck with a much more expensive loan, there are a lot of downsides to selling. So be sure you consider these possible disadvantages before deciding to sell and cash in your equity during this time when homes are priced so high.