5 Reasons NOT to Sell in This Hot Real Estate Market

Homeownership By Noah - May 18, 2021

The housing market has been blazing hot, due in large part to effects of the coronavirus pandemic. Low inventory of available houses, record low mortgage rates, and high drive from some buyers to move (including people who may have realized they need more space to work from home, or plan to move before the new school year) combine into a perfect recipe for a serious seller’s market. Stories of people bidding over asking price, sight unseen, or homes selling for more than $100,000 over list price are popping up everywhere.

So if the market is so perfect for sellers right now, why should homeowners think twice before listing their homes for sale? Often, if something seems almost too good to be true, there may very well be potential downsides you may not have considered. A charged market can result in both the best and worst time to sell a house, depending on individual factors about your life and your personal finances. Before you take the plunge into a roiling real estate market, check for these signs that selling in a hot market might not be the best move for you.

You Recently Refinanced

Homeowners who are struggling to make mortgage payments have a few options. Sometimes, a change in income is drastic enough that selling the home and looking for a more modest option is the best solution. Other times, refinancing an existing mortgage can give homeowners breathing room to stay in their current home.

Today's mortgage interest rates are averaging around 3%, or even a little lower. Even if mortgage interest rates are expected to rise in 2021, staying in the 3.0-3.5% rate for much of the year, that’s still lower than historical average mortgage rates in recent years.

If you recently chose to refinance your mortgage to a more comfortable monthly payment, it may make more sense to stay in your home and reap the value of that new financing plan.

You Don’t Have a Renovation Budget

In a market full of heated bidding wars, it may seem almost laughable to spend a lot of time and money on renovations before listing your home. You may be asking yourself:  are renovations worth it in a seller’s market?

This is the case of the war of competing adages. One school of thought says renovating and staging your home is the key to more interest from potential buyers and quicker sales. Another says, in a seller’s market so fierce, why waste time and money on home improvement when demand is high and buyers are snapping up new listings almost immediately?

The real adage to follow, as always, is “location, location, location.” Check your local market and ask your real estate agent for input. It may be that your area is hot enough that buyers will bite, and even compete, on houses without the need for renovations. If your local market is a little slower or your house is noticeably out of date compared to similar homes, a few renovation tweaks may make you more competitive and earn a better sales price.

Here's advice for home sellers on what to fix and what not to fix:

  1. Concentrate on lower-cost, quick, cosmetic updates that increase your curb appeal in photos.
  2. Fresh paint, a power-washed exterior, new fixtures like ceiling fans and doorknobs, and light landscaping (e.g., planting the flowerbed) can make a home look more updated and move-in ready.
  3. Fixing leaks and removing signs of old water damage can help you put your best foot forward during an open house.
  4. Unless your local real estate agent recommends it, major renovations, like a full bathroom or kitchen remodel, are probably overkill. Home buyers may be fine with renovating to their tastes.
  5. Steer clear of “personality.” Potential buyers may not agree with your taste in accent walls or backsplash. Rearranging bedrooms, such as creating a master suite on a separate floor, may also backfire and put off buyers with children who want to keep close.
  6. Staging is critical. In a seller’s market, where buyers may have to pay top dollar to be competitive, buyers want to feel sure they love their new home. Declutter and stage photos for optimum light and space to show your house is well worth the asking price.

You’re Not Sure Where to Move

The worst time to sell a house is when you’re not sure you’re financially prepared to find a new home that meets your needs. Soaring asking prices and bidding wars mean you might get a high price from selling, it’s true. But you should also expect to see similar high prices and competition as a buyer. Homeowners need to decide if it’s worth it to make the leap.

“Improve, don’t move” may be the adage of the moment, even at a popular time when sellers are closing on skyrocketing home prices.

If you’re not ready to go house hunting yourself, but you don’t want to miss out on wild appreciation in your current home, consider whether a Home Value Investment from a shared equity company like Noah might be a good way to enjoy a spike in equity. Homeowners can cash out some of their increased equity, which may put more ambitious home improvement projects in reach. Because Noah’s Investment is based on shared appreciation, most homeowners won’t ever pay more than the amount of equity they earn over the next 10 years (or whenever they decide to exit). If the home depreciates in value, Noah shares in that depreciation as well. In other words, homeowners worried about the bubble bursting may prefer Noah vs. a home equity loan.

You’re Changing How You Use Your Home

The last year has put a strain on all but the most committed homebodies (and even some of these folks may be getting stir crazy!). If you’re among the many people who have spent way more time than you expected or preferred at home for the last year, the thought of moving may feel like a great psychological as well as financial decision.

Not so fast! Any type of change in home financing deserves thoughtful consideration. Now may be a prime opportunity to sell your home, or it may not. Consider why you want to move. Does it make real financial sense? Or are you thinking of recent logistical struggles, like trouble working from home? If you’ve recently completed a home renovation or your working situation is about to change, you may find that the home you thought you’d outgrown will feel more comfortable as some routines return closer to pre-pandemic rhythms.

You’re Planning to Downsize

Selling a large house and moving into a smaller home seems like a surefire way to pocket some extra funds, but this may not always be the case. In recent years, starter homes have gained equity faster than more luxury properties in many areas. There’s also a major inventory problem in real estate markets across the country, meaning current sale prices may end up way over what you’d typically expect. Anecdotal stories of 3- or 4-bedroom properties selling for six figures over asking price are common in the current market!

Talk with your financial advisor and realtor about the most advantageous timing for a home sale, if you have flexibility to time a move. Depending on sale prices on comparable homes and your ideal “downsize” model, you may decide it’s better to wait until the market returns to a more stable pattern.

Just because an opportunity like a strong seller’s market arises doesn’t mean it’s the perfect fit for every homeowner. Take time to consider your true priorities, not just market trends, and you’ll be better prepared to take advantage of the opportunities that will truly benefit you.