"Should I sell now if I want to sell my home at the top of the market?" This is a question we hear a lot from sellers.
We all know someone or have met someone with that great story about how they timed the market perfectly in 2007 and sold at the height of the market right before the crash. They made a pile of money and usually feel like the smartest guy in the room when they tell their story.
Here's the straight truth: nobody can time the market.
What are the biggest factors that affect the market?
Too many factors affect the real estate market to make timing the market a realistic possibility. Even mortgage lenders and builders who have billions of dollars invested in the real estate market are unable with accuracy to predict or time the market. The best they can do is hedge their bets in various ways such as raising interest rates on mortgages at the first signs of trouble or a shift as we have seen lending companies do several times over the last couple of years.
Such as when the shutdowns occurred during the pandemic, we saw overnight mortgage interest rates go up over a full point overnight, and lenders changed their qualifications for a loan so that only the most qualified people that applied received a mortgage during these months. The reason for this was simple: mortgage lenders were not sure if people would be able to pay their mortgages after the shutdowns, and if that was the case they wanted to lend money to only the most qualified, thus overnight drastic rate hikes. Now once buying continued at a frenzied pace they backed off of these
For home builders, at the first signs of trouble, they simply slow down or stop building new units. This in turn causes an even greater squeeze on available inventory, as builders have built far fewer homes in the last two decades than in the four previous decades.
To understand the impact of this, let's look at some of the numbers: between 1970 and 2009 an average of 12.89 million homes were built in the US per decade. Between 2010 and 2019 only 6.9 million homes have been built in the entire country. This has been a primary driver of the low inventory market that we have been experiencing for years.
A quick peek at these two entities shows us that interest rates are rising quicker than an overflowing toilet.
New housing starts are up significantly since October of 2021. So what does this tell us about timing the market? NOTHING!
What we do know is that with interest rates rising and inventory levels growing. This, combined with weary buyers who have been in the market for months and unable to buy, getting beat out repeatedly by better and stronger offers, and the buyer who is willing to pay just a bit more than them.
The straw that will often break this buyer's back will be watching their home affordability go out the window, with the interest rates and they will just decide to rent for another year and see what happens with this crazy market.
What does this mean for you the seller?
These combined factors of rising inventories as the sellers who have been waiting for the top of the market decide to jump on the bandwagon and sell along with a massive buyer exodus will likely cause what I like to call a normalization of the market. This means that annual gains of 9-20% in home values will cease to occur.
In fact, we will probably see some movement in the opposite direction and could very likely see the average home price drop significantly by the end of the year.
Yes, folks, you heard that right: in my opinion, we will see the home prices start to come down by the end of the year. Market activity will be significantly decreased as the aforementioned weary buyers exit the market in droves, either from just plain exhaustion or being priced out of the market by raising interest rates.
That being said, if you are thinking of selling your home and you want to be the guy or gal with a great story about how you timed the 2022 Market, now is the time. If you would like to receive a free market analysis on your home or would just like to chat a bit about this video and what we can do to help you get top dollar for your home guaranteed please call us at 714-406-1414.