Tuesday, February 26, 2013

Why Should Sellers Jump into This Market?

It's been a long haul for the real estate market these past five years, but things are looking up for sellers this year. The entire DC Metro region is experiencing price appreciation, listing inventory is at historic lows, and buyers are out looking for their new home. So, why are sellers failing to put their houses on the market? The answers I get to this question generally come down to, "I'm not in a hurry and want to wait until there is more appreciation."

Here are the reasons this may not be the wisest choice:

What Do You Gain From Waiting?

1. We are all hoping that prices will appreciate during the next few years as the economy recovers and housing supply (especially in our area of North Bethesda) doesn't keep up with the population increases, but waiting to sell a property that has equity in it removes the potential to invest the funds in another appreciating property or in some other investment vehicle entirely. If you are familiar with the stock market, you understand the old adage that it often doesn't pay to be a "market timer" to try to capture the top or bottom of a market trend. Calculate what your proceeds will do for you today vs. what you think they can do for you in a future market.

2. If other sellers take the same position, there will be more houses on the market next year, which could dampen appreciation next year. If that happens, you would have lost a year for little increase in value.

3. Do you have some other place you'd rather be living? If so, what is the value in your life to waiting for a future event rather than proceeding with your goals and aspirations sooner?

Buyers Are Motivated Now

1. Interest rates are at historic lows, meaning that your buyers can afford more on their income. It is widely posited by economists that the time for these rates is limited. As the economy strengthens, banks will raise their rates. They are itching to do this, since none of them likes making 3.25% loans for 30 years. Higher interest rates are strongly correlated to pressure on price appreciation.

2. With few houses from which to choose, buyers are finding themselves competing when they make their offers. This forces them to make the best offer they possibly can (and quickly, too!) if they want to find a house they would like to buy. Their willingness to negotiate to better terms for the sellers is enhanced. 

Each person's circumstances are different, and all of the factors need to be weighed based on that person's priorities, be it financial or based on lifestyle choices or, as is usually the case, a combination of the two. Sometimes, it's helpful to examine motivations to act now or to wait with a trusted adviser. I hope that the options and conditions that I have outlined above are useful in your decision-making process. 

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