Sell now or wait? Tips to ponder
May 13, 2011
Less-than-buoyant reports on home values are causing anxious nights for some homeowners who can’t decide if they should sell now or wait a few years in hopes of a higher price.
“There are still lots of ‘hold out’ sellers. They’re part of the shadow inventory of properties not yet on the market,” says Karl Case, a senior fellow at Harvard University’s Joint Center for Housing Studies, a think tank on real estate.
Case is very familiar with U.S. real-estate valuation trends. In fact, he’s the co-creator of Standard & Poor’s Case-Shiller housing indices, widely quoted measures of property values. But despite continuing uncertainty about values in many areas, and an excess of unsold properties, he’s no pessimist about real estate going forward.
“The people buying homes now are incredibly bullish, which is a good sign,” says Case, also an economics professor emeritus at Wellesley College.
Case says there are “micro markets” throughout the country where prices have begun rising again due to strengthening demand. But there are also a number of neighborhoods with an oversupply of unsold homes and lots of foreclosures. These are areas where many homeowners are still waiting for a pickup in values before they try to liquidate.
Are you uncertain if you’d be better off selling now or postponing for a few years? If so, Case says the right answer depends both on your personal circumstances and the trends in your local market.
Here are a few pointers for would-be sellers who are conflicted on market timing.
– Research the economic prospects of your local community.
Case recommends that homeowners who are conflicted about when to sell spend some time researching their local economy before finalizing their decision. It’s no secret that areas of high unemployment typically have low demand for housing.
Because of this close connection, he urges uncertain homeowners to gain some context on the local jobs picture before they time their sale.
To learn more about your local job market, Case suggests you gather statistics from the website of the U.S. Bureau of Labor Statistics (www.bls.gov). If employment is weak in the area where you’d like to sell a property but you expect that trend to change in the near future, you may wish to postpone. But an improving jobs picture could be a signal to sell soon.
– Scope out open houses and listing agents in your area.
Statistics can tell you only so much. Anecdotal reports – derived from those actively involved in real-estate sales – are often more telling about the true strength of the market than are numbers.
In advance of deciding whether to sell now or wait, Case recommends that would-be sellers visit weekend open houses to chat with real-estate agents about the current level of homebuyer activity and interest in their neighborhood.
“If all you see are forlorn-looking agents with stacks of extra marketing brochures and few customers, that’s not a good sign,” he says.
– Consider your personal situation before deciding to hold or sell.
John Sullivan, a real-estate broker and past president of the National Association of Exclusive Buyer Agents (www.naeba.org), says many who are seriously considering a postponement of their sale intend to rent out their property in the interim.
But Sullivan says that becoming a landlord can have significant financial implications. These can include tax consequences for owners who’ve been collecting rent for several years prior to selling.
“Ask your accountant about the capital-gains-tax implications of becoming a landlord and how they would affect you personally,” he says.
Another financial factor to consider is whether you can reasonably expect to collect enough rent to maintain a positive cash flow each month to offset your regular mortgage payments and upkeep expenses.
“For maintenance alone, you need to allow another 10 percent over your regular house payment for a rental property,” Sullivan says.
In addition, he says it’s wise to factor in a projected increase in property taxes, especially if you’re living in a jurisdiction that’s facing a budget deficit and where local taxes could rise to cover the gap.
– Look on the bright side of the real-estate picture.
Whether they’re planning to sell now or later, homeowners should remain optimistic about their prospects, Case says. This is especially true for those who plan to move up to a larger or more luxurious home in the near future.
“By selling now, you might get less for your house than you’d like. But you could also get a still-larger discount on the next home you own,” Case says.
He believes that along with pent-up demand to sell among many current homeowners, there’s also pent-up demand among many would-be home purchasers who could rush into the market at any time.
“Because there’s a shadow market among buyers as well as sellers, it’s always possible your market could turn on a dime,” Case says.