What's the Best Move for Your Wallet: Sell or Hold Onto Your Home?
You might be wondering if it’s a good idea to wait to put your house on the market -- especially if the market around you is rising. After all, if you can get more money in another few months, why not?
Unfortunately, housing market trends aren’t that cut and dry. Rather than focusing on the economy, think about personal factors such as:
- Your budget for moving-related expenses
- Your family size
- Your credit history and score
- Your ability to keep up with your mortgage
In this article, we'll explore how housing trends can paint a mixed picture ... which is why it's better to put the "personal" back into personal finance and make housing choices based on your own needs rather than making guesses about the economy.
What Housing Trends Show So Far
Let’s take a look at how housing prices have trended recently. According to CoreLogic, a property research firm, overall home prices saw a 6.3% increase from May 2014 to May 2015. From April 2015 to May 2015, home prices increased by 1.7%. Furthermore, May 2015 marked the 39th consecutive month home prices have increased. That means this trend began in 2012.
Trends Can’t Be Relied Upon
Trends are trends for a reason; they’re not guaranteed. Many people still remember the housing crash that took place in 2007, when, according to Federal Reserve statistics, homes in the U.S. lost $6.3 trillion in value during early 2006 to late 2010.
While the market has recovered, this serves as a good reminder that things can always change. Just as the stock market fluctuates, so too does the housing market.
Speaking of which, the Federal Reserve has been in talks to raise rates for quite some time now. This will have an impact on mortgage rates as well as housing prices as inflation is set to increase.
While 30-year mortgage rates are currently around 4%. Some commentators say they might rise to 5% or 6% in 2016. These interest rate forecasts may or may not come to fruition. You may not want to delay the sale of your home based on the opinions of others and the whims of the market.
Good Time to Sell
If waiting around for home prices to continue to increase isn’t a good idea, when is the best time to sell? Only you can answer that.
Your timing shouldn’t be completely dependent upon the market. There are several different circumstances you might find yourself in that will push you one way or the other.
Here are some to consider:
- A job relocation: Have you accepted a job offer that’s several hours away? You may be forced into selling your house, especially if you want to buy another and don’t want to deal with having to pay two mortgages. In this case, waiting to “time” the housing market is silly. There’s no reason to pay two mortgages in hopes of getting more cash.
- What does the equity in your home say?: Being underwater on your mortgage is never a good thing, and it will make it harder to sell your home and qualify for another mortgage. If this is the case, you shouldn’t consider selling until you’ve built up at least 20% equity in your home.
- Get your financial situation in order or look into refinancing (if your credit score is great) to make your mortgage more affordable.
- Do you have excellent credit?: Having a credit score of around 720+ is generally recommended if you want to shop for a mortgage for your next home. This will give you access to better rates, saving you thousands on the cost of interest over the life of your mortgage loan. It’s smart to hold off on house hunting until your credit score is in better shape.
- Is your house becoming too crowded?: Many people move because their family has outgrown their current place. If you’re on top of each other at all times, or if there’s tons of clutter around because your belongings simply don’t fit into your space, you might want to consider moving sooner than later. The emotional stress and possible conflict don’t make waiting worth it.
- Have you thought about moving expenses?: While moving around and getting to explore different neighborhoods can be fun, the entire moving process might not be. On top of that, it can be rather costly. Moving trucks can cost upwards of a thousand dollars, and hiring movers can be pricey.
According to the American Moving & Storage Association, the average cost to move within a state is $1,170 – it increases to $5,630 when moving out of state. You don’t want to move homes if it’s going to put you into debt. Wait until you have enough saved.
Sell When the Time is Right for You
Overall, you need to decide when the right time is to sell.
There are many factors to take into consideration, and housing prices should be at the bottom of your list. It’s not something you can control, and basing your decision to move on it isn’t wise.
Do what’s right for yourself and your family. Make decisions not based on the market, but rather based on your personal needs and circumstances. If you need help deciding whether or not to list your home, talk to a trusted real estate agent who can guide you.