By now you have undoubtedly heard that it is a hot seller’s market across the country. Have you thought about selling your home? The biggest question: Is now the best time for you to sell your home?
Many people are skeptical that we are in another housing bubble. Memories of the great recession still linger in the minds of all those who were impacted by many years of the short-sale and foreclosure market.
The median home prices have increased upwards of 8% around the country year over year. Some areas are experiencing an even higher average home price increase.
What is causing the home prices to increase?
Should you cash-out now and sell your home?
In all fairness, there are many factors causing the price jump and it is not isolated to specific areas. Determining if it is the best time to sell your home is dependent on your particular situation. Before we can answer the question, let’s explore a few of the various factors.
A little history about the real estate market.
Prior to the Great Recession, the absorption rate in Pinellas county, Florida hit its highest point in July 2005. The absorption rate is calculated by the number of homes on the market versus the number of homes sold in a given period of time. In July 2005, the single family residential absorption rate hit a record high of 62%, meaning 100 homes came on the market and 62 sold in a 30 day period. The average sales price hit its peak one year later in August of 2006. However, most people did not feel the bubble pop until 2008 with the financial industry crash.
So where are we now?
The absorption rate for single family residential homes started to climb in June of 2020 with 79% absorption rate, the highest since July 2005. By December it was at 109%. In March of 2021 the absorption rate was 213% (for every 100 homes listed, 213 were sold). Fortunately it has decreased slightly over the past few months and we are now at an absorption rate of 171%. Does this mean the housing market is cooling off?
Where did all of the houses go?
The New York Times posted a great article in February 2021 discussing several factors impacting the current real estate market. It is probably one of the most comprehensive articles I’ve come across discussing our current real estate market.
I remember listening to an interview with Warren Buffett in 2012 as he discussed his concerns for the long term housing market. He saw the writing on the wall way before anyone else, but that is the Buffett way.
Essentially builders stopped building new construction homes in 2008 and new construction starts lagged until late 2012. The chart below from Trading Economics shows the number of new construction housing starts in the US from 1990 through 2021. Fast forward 10 years and you will notice new construction starts are still well below what they were in the early 2000s.
However, our population growth did not slow down. Millennials (born between 1981-1996) make up 72% of the US population and are also the dominating force of homebuyers.
When you mix 10 years of decreased housing supply with the largest segment of the population secure in their careers, starting families and buying homes, it is a recipe for a major housing shortage.
What does all of this mean if you are thinking about selling your home?
A proper consultation to understand your goals is necessary to determine if now is the right time for you to sell your home.
Here are a couple of other things to consider before selling your home:
Seasonality: The annual sales cycle might also come into play with your plan. The month you put your home on the market may impact the number of eyes on the property and can ultimately impact the value. Depending where you live will depend on the best month to market your home. Traditionally the best months to list your home for sale are March through May with the highest closing months being June, July and August.
Where will you live? The market you sell in is the market you buy in, meaning if you sell high you will buy high. If you are planning to rent it is important to understand the rental market is just as depleted as the housing market. Make sure you know where you are going before you sell your home.
Tax implications: Your house is a great investment and has substantial tax incentives. Single homeowners can earn up to a $250,000 gain on the sale of their home tax free. As a married couple selling a primary residence, the gain increases to $500,000 tax free! Consulting with your CPA or Estate Attorney is recommended before putting your home on the market.
So, is now the best time to sell your home?
If you know where you are moving and you are ready to cash-out in this real estate market, it might be a perfect time for you to sell your home. The only thing you are going to lose in this market is your home. If that is something you are ready to set free, then call today to put things into action.
If you still have additional questions, take time to do your research. A professional real estate consultant will help you uncover gaps in your plan and be able to bridge the gaps for you to hit your goals. If you are considering selling in this hot seller’s market, feel free to send me a message for a free consultation. With over 18 years experience in real estate and having owned & operated the largest real estate brokerage in our area, I am happy to put my experience and knowledge to work for you.
YES-Homes Luxury Agreement: We are committed to helping you meet your real estate goals in a highly professional, mutually respectful process. Our market knowledge, contract expertise, and customer service processes are guaranteed to make you a winner in the home selling and buying process. Each step along the journey will be clear and simplified with your needs as our priority. We will take the confusion out of the journey and ensure you make the next best move for you and your family. This is the luxury real estate service you deserve and will want to tell your family and friends about!