In the final months of 2022, the housing market isn’t the same as when the year started. In an effort to battle inflation, the Federal Reserve has increased interest rates repeatedly throughout the year, contributing to the average 30-year, fixed-rate mortgage interest rate reaching a 14-year high of 6.29% as of Sept. 22, according to Freddie Mac. With interest rates making monthly mortgage payments even higher, many buyers are stepping back as they reassess their ability to afford a new home.
Still, home prices continue to rise year-over-year in most parts of the U.S., and selling your home isn’t necessarily a bad idea, if you consider other key factors.
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 (even with lower demand), 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 before the end of 2022, along with three reasons it’s a good idea to make the jump now:
— Wait to sell: You just bought or refinanced.
— Wait to sell: You’re worried about affording your next purchase.
— Wait to sell: You’re worried about finding your next home.
— Sell in 2022: A high interest rate doesn’t scare you.
— Sell in 2022: You’re OK waiting for the right buyer.
— Sell in 2022: You need to move.
Wait to Sell: You Just Bought or Refinanced
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 have locked in and continue to build equity in your home.
If you’re most comfortable with your current mortgage, plan to stay put for a while, as mortgage interest rates aren’t likely to see a significant drop in the next few months.
“The housing sector is very interest-rate sensitive and has cooled significantly in response to rising mortgage rates and declining affordability,” wrote Odeta Kushi, deputy chief economist for First American Financial Corp., which provides title insurance and risk solutions services for real estate transactions, in an email. “While the Fed is aware of the housing market deceleration and the housing market’s multiplier effect on the economy, that recognition is not likely enough to deter the Fed from further monetary tightening. We’re not out of the woods yet when it comes to inflation. The Fed remains data dependent and will raise the federal funds rate until there is sustained evidence that inflation is receding.”
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 quickly rising prices and lack of new homes for sale. Now, add interest rates over 6% 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.
“Potential sellers must ask themselves if they’re ready to move and consider if they will be able to find another home that fits their budget,” Kushi says. “Many markets across the U.S. remain in a seller’s market, but they are considerably less competitive than they were in 2021 and early 2022, so sellers may need to adjust their price expectations to the realities of the current market.”
Wait to Sell: You’re Worried About Finding Your Next Home
The market is more balanced than it was at the start of the year, but housing inventory still remains low. With would-be buyers opting to pull back, houses sit on the market a bit longer than they did before.
Shopping for a new home is easier than it was in 2021 because you’re less likely to have to compete with multiple offers and bids well above the asking price, but more than 18% fewer homes sold in August 2022 compared to August 2021, according to Redfin, and that’s not exclusively from lack of demand. 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.
Sell in 2022: A High Interest Rate Doesn’t Scare You
Approaching the close of 2022, mortgage interest rates are much higher than they were in recent memory. For many homeowners, that’s enough to have them opting to stay in their current house. For others, the interest rate isn’t as much of a concern.
“Sellers, apples to apples, are going to be getting a higher interest rate, but they’ve earned a lot of equity the last couple of years as well,” says Nobu Hata, CEO of the Denver Metro Association of Realtors. Higher equity at the point of sale can contribute to a larger down payment, which effectively lowers the monthly payment of a new mortgage.
Hata adds that anyone looking to purchase a new home in the current climate of higher interest rates should shop around with lenders more than before. “There are some folks out there, mortgage companies, that will allow you to lock (an interest rate) for a longer term. There are some mortgage companies that allow you to relock, should rates go down,” he says.
Both Hata and Kushi stress that there’s no way to perfectly time the mortgage market with a guarantee you’ll get what you want. Any decision to sell and purchase a new home should be based on your financial situation and the amount of risk you’re willing to take on based on current market conditions.
Sell in 2022: You’re OK Waiting for the Right Buyer
There’s a lot of discussion about buyer demand dropping as high home prices and high interest rates put pressure on affordability across the U.S. However, the U.S. is still seeing positive home price growth. The median home sale price in August was $406,890, according to Redfin, which is a 7.1% increase from August 2021.
Where sellers will notice a difference is the amount of time a home sits on the market. A year ago, multiple offers on the first day a home hit the market were common. Today, there are fewer offers and at a more leisurely pace. Redfin reports homes had a median of 26 days on market for properties in August, nine days more than August 2021.
“If your house is totally turnkey, if it looks great online, it’s got the premium finishes that most buyers who actually want to live in the home are looking at, you’re still going to be in a pretty good position. Gone are the days of the house that needs a little bit of work still going for a premium,” Hata says.
Sell in 2022: 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.
“Some homeowners may find it’s time to downsize, or they may need to relocate to another city or state. It can be risky to try and time the market, so when it comes to making the decision to sell or buy, it’s important to have a budget and a plan in place,” Kushi says.
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Why You Should (and Shouldn’t) Sell Your Home in 2022 originally appeared on usnews.com
Update 09/22/22: This story was previously published at an earlier date and has been updated with new information.