There are plenty of scenarios that make selling your home necessary — whether it’s to move across the country to be closer to family, because you need to downsize or you can’t afford mortgage payments anymore.
But when your timeline to move is flexible, you likely want to try to strategize over when and how you place your home on the market to find buyers, maximize profit and make it easier to buy a new home, if that’s what you’re doing next.
Thus far in 2023, homeowners have experienced a different market than they witnessed in the early years of the pandemic with rapidly rising home prices, with higher interest rates since 2022 still tempering demand somewhat. While the latter half of 2023 may see a recession, mortgage interest rates are expected to stabilize and some buyers may be able to return to the market with renewed buying power. Buyers who have been in their homes for at least a few years can expect to see that their property value has grown — though it may look less thrilling than the peaks of 2021.
If you’re on the fence about selling, you have a few choices: You can put your house up for sale to take advantage of current low inventory, you can wait to see how interest rates and inflation play out as they relate to housing or you can opt to stay in your current home for the foreseeable future.
Here are three reasons you shouldn’t sell your home in 2023, along with three reasons it’s a good idea to make the jump in the next 12 months:
— Wait to sell: You bought or refinanced in the last couple of years.
— Wait to sell: You’re worried about affording your next purchase.
— Wait to sell: You’re worried about finding your next home.
— Sell in 2023: A high interest rate doesn’t scare you.
— Sell in 2023: You understand your home’s value.
— Sell in 2023: You need to move.
Wait to Sell: You Bought or Refinanced in the Last Couple of Years
If you’re one of the many homeowners who have moved or refinanced in the last few years, there’s no reason to consider selling your home in the immediate future. Hopefully, your mortgage has helped ease any financial woes with low monthly payments.
Ahead of 2022, many homeowners were able to lock into mortgage rates below 3%, which makes selling any time in the near future far less attractive. Unless other factors are making a move necessary, enjoy the low interest rate you locked in and continue to build equity in your home.
Mortgage rates have risen and dropped many times during the first half of 2023, but have remained below the peak of 7.08% for a 30-year, fixed-rate mortgage in November 2022, according to Freddie Mac. As of June 15, Freddie Mac reported the average interest rate for a 30-year, fixed-rate mortgage was 6.69%.
But if you managed to secure an interest rate below 3% — or even 2%, for some homeowners — you’ll see little incentive to more than triple your interest rate for a new home.
You won’t be the only homeowner feeling locked into your property based on mortgage rates. “That’s likely to keep a lid on how much inventory growth we’re going to see,” says Danielle Hale, chief economist for Realtor.com.
Wait to Sell: You’re Worried About Affording Your Next Purchase
Over the course of the last couple of years, worries about affording your next home purchase were tied to the housing market’s rising prices and lack of new homes for sale. Now, add interest rates between 6% and 7% to the mix, and there seems to be little financial benefit to buying a new home. Don’t be afraid to wait to sell your home if you think the timing isn’t right.
Even with plenty of home equity, you may find that your buying power is diminished when you factor in how much more you would have to pay toward interest each month.
“That’s a tough financial calculus, and that’s keeping the more discretionary sellers out of the market right now,” says Lisa Sturtevant, chief economist for multiple listing service Bright MLS.
If you can’t afford the home you would want to have next, it makes sense to wait to put your house on the market.
Wait to Sell: You’re Worried About Finding Your Next Home
The market is more balanced than it was in 2021 or even in the first half of 2022, but housing inventory still remains low. Plenty of other homeowners are opting not to list their home for the time being, and while there are fewer buyers than there were in the peak of the coronavirus pandemic, more are coming back to the market than you may expect.
“In the spring of this year we saw buyers come back. Newly pending listings have ticked up,” says Orphe Divounguy, senior economist for Zillow.
Shopping for a new home is still easier than it was in 2021 because you’re less likely to have to compete with as many multiple offers and bids well above the asking price. But there were more than 24% fewer new listings in May 2023 compared with May 2022, according to Zillow. With fewer homes on the market to choose from, you may struggle to find the right number of bedrooms, ideal location or overall feel that will make you willing to take on a higher interest rate.
“The market’s still very competitive,” Divounguy says.
Sell in 2023: A High Interest Rate Doesn’t Scare You
Mortgage rates reached higher levels in 2022 than in recent memory. For many homeowners, that’s enough to opt to stay in their current house. For others, the interest rate isn’t as much of a concern.
“There may be buyers that are not as rate sensitive,” says Mike Reynolds, vice president of investment strategy at Glenmede, a Philadelphia-based wealth management firm. You may be a cash buyer without plans to finance your next house at all, or you may have enough equity in your current home to feel confident you can buy down your next mortgage rate to a more attractive level.
The more prolonged period of interest rates above 6% has also given many would-be homebuyers the opportunity to adjust to the prospect of higher mortgage costs — it may require an adjusted budget, but it doesn’t necessarily mean you can’t make a purchase.
“Buyers seem to be OK with the idea that 7% is the norm, not the exception,” Divounguy says.
Plus, at the end of the day there is no way to perfectly time the market. If you can afford to move and want to move, selling your home in 2023 may be the best timing when there’s no way to know what’s ahead in 2024 and beyond.
Sell in 2023: You Understand Your Home’s Value
Many housing markets across the U.S. are still seeing plenty of buyer interest, but properties aren’t getting the regular bidding wars and sky-high sale prices they were in 2021. If you sell your home in 2023, buyers will be less inclined to offer above the asking price — and they may not look at all if the asking price is too much.
Divounguy explains that the houses selling fast today and receiving more than one offer are those that are priced to sell and offer all the marketing bells and whistles, like a 3D home tour and professional photography.
Unless your real estate agent says otherwise based on recent sales in your area, you’re unlikely to get $100,000 above the asking price for your starter home without an appraisal contingency. With buyers looking carefully at their budgets, they’ll be making serious offers based on what makes sense for their budget and what they believe your home is worth.
Sell in 2023: You Need to Move
If you need to move for any reason, it’s still possible to sell your home and find a new one. If you lost your job, you may be worried about your ability to continue to pay your mortgage. If that’s the case, selling may be a valid option. But plenty of others are opting for a life change that involves moving to another state, more room for a growing family or a bigger footprint needed for permanent work-from-home space.
A profitable sale and purchase of a new home is still possible — but proper preparation and realistic expectations are key.
Additionally, change in conditions can open doors for buyers to come back to the market — particularly if mortgage interest rates shift down further and if inflation continues to decline. If a recession occurs in the latter half of 2023 as experts predict, a drop in mortgage rates could help buyers get back in the market.
However, don’t expect the Federal Reserve to be too eager to drop rates suddenly in the event of an economic downturn. While mortgage interest rates are technically independent of the Fed’s funds rate, they often reflect changes. “The Fed’s going to be very careful not to reignite inflation that has become very sticky,” says Reynolds, who anticipates mortgage rates to remain on the high end where they’ve been through the end of the year.
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Why You Should (and Shouldn’t) Sell Your Home in 2023 originally appeared on usnews.com
Update 06/20/23: This story was previously published at an earlier date and has been updated with new information.