Will 2014 Be a Better Time to Buy or Sell a Home Than Now?
If you answered maybe,you could be right. If you answered no, your’re probably more on target. Whether you are a possible seller, buyer or both, consider four reasons that indicate 2013 may be your better bet.
1. First and foremost, interest rates are going up
According to Bankrate.com, the benchmark 30-year fixed-rate mortgage was 3.87 percent one year ago, and as recent as May it was 3.52 percent. Today, the same rate is 4.48 percent, nearly a point higher than just two months prior.
What rising interest rates mean for buyers.
It is impossible to predict what will happen in the future, but a Reuters poll from earlier this year indicated that experts believe interest rates will continue heading north. If their prediction holds true, and rates rise one percent for example, monthly payments on a $200,000 home (assuming a 10 percent down payment) will increase nearly $100. Using this scenario, the additional cost to the borrower over the life of a 30-year loan is about $20,000.
What rising interest rates mean for sellers?
First, higher interest rates means the pool of buyers who will be able to purchase your home shrinks. Fewer buyers, means less demand, and in some cases, it may also mean lower prices. In addition, most sellers eventually become buyers, and in simple terms, higher interest rates means your dream home costs more (see the scenario above, “What rising interest rates mean for buyers”).
Many clients have told me they are waiting one more year to sell. While the prospect of additional appreciation is enticing, it will be difficult for sellers to make up for the higher cost of borrowing money. If prices adjust upward by six percent in one year, and that may be a stretch depending on location, you can expect to receive $12,000 more on a $200,000 home. That’s a net loss of $8,000 ($20,000 if rates go up one percent less $12,000 in appreciation by waiting to sell).
2. Home prices are also rising
The latest report from the Columbus Board of Realtors indicated that the year-over-year median home price in Central Ohio was up 5.9% compared to May of 2012. Will the trend continue? Only time will tell, but an Ohio Association of Realtors survey indicated that 97 percent of Central Ohio REALTORS® describe the current housing market as moderate to strong and 91 percent expect home prices to increase in the next year.
What does rising home prices means for sellers?
Should the current rate of appreciation continue, rising prices can mean a better gain by waiting, BUT that’s only if you are not buying another home or are downsizing. If you are trading up on the other hand, waiting will likely mean more money out of your pocket in the long run.
Using the same example from above, we saw that a $200,000 home that appreciates at six percent annually nets a gain of $12,000 in one year as opposed to selling now. Sounds great, right?
At first glance, yes, but consider what this means if you buy a more expensive house than the one you sold. A home valued at $300,000 in the current market that increases by the same six percent will cost you $318,000 a year from now. The end result is a net loss of $6,000 than had you sold and bought in 2013. Add interest rates to the equation and procrastination could significantly reduce your purchasing power.
And then there’s those pesky interest rates, which may only compound the problem.
What does rising home prices mean for buyers?
Just like interest rates, price increases negatively impact buyers, with lessened buying power as the end result. Search homes for sale to see what you can afford today. Should home prices continue to appreciate at six percent, many of the same types of homes you find now can become out of reach. Add in rising interest rates and 2014 may be a less attractive time to buy than 2013.
3. The number of homes available in the region is also growing
Competition can have an impact on not only price, but also how long a home lingers on the market. At the close of the second quarter of 2012, there were just over 12,000 homes for sale and the average days on the market until sale was 89. In May of 2013, there were approximately 10,000 homes for sale and homes sold nearly three weeks faster, with the average days before sale at 67.
What growing inventory means for sellers.
More homes for sale means more competition. I’m looking into my crystal ball a bit, but given recent conversations with potential sellers, I foresee inventory continuing to grow. This could result in more days on market, and put a damper on appreciation. This is not to say values will necessarily decrease, but prices may just not grow as quickly. If this is the case, you could find yourself with an even greater long-term gain if you sell sooner rather than later.
What growing inventory means for buyers.
Many homeowners are having a hard time finding suitable housing options, especially in hot markets like Bexley, Lewis Center and Powell among others. If more sellers get off the proverbial fence, it could mean more homes to choose from. The big question is, however, are you willing to pay more for your home? More interest and increasing prices loom large. Caveat emptor as they say!
4. No one wants to talk about winter
Okay, outside a few of us, at least most of us don’t. Colder weather lingers in our not too distant future. So what, you say? Let’s put things in perspective. Last January, which was one of the best winter months for Central Ohio home sales in recent years, 1,374 homes traded hands. In comparison, almost twice that amount, or 2,756 homes, sold this May.
What the change in season means for sellers.
The statistics don’t lie. The Central Ohio housing market practically goes into hibernation over the winter months. Not only are fewer homes sold, homes are likely to command between five to fifteen percent less money than in warmer months.
What the change in season means for buyers.
Fewer buyers can mean less competition from November to March than in spring and summer months. Lower prices are also possible, but winter can also mean fewer homes to choose from. The number of available listings is usually lower during those months causing the dream home to become even harder to find.
Everyone has their personal and financial reasons for buying or selling a house. If your’s is procrastination, these four reasons are just a few of the most compelling arguments to jump off the fence feet first and land on the road to realizing your real estate goals.
Call 614-439-6180 today to learn more about the Central Ohio real estate market and for assistance reaching those objectives.