Homeowners who want to sell their homes are likely asking themselves, “should I sell my house now or wait until 2023”? This is a great question, but unfortunately, there is no simple answer. It depends on the individual situation and goals of the seller, along with the specific city or market the home is in.
By now, most people know that home prices exploded after the onset of the Covid pandemic. Between April 2020 and June 2022, home prices appreciated from an average of $217,000 to $308,000, a whopping 40% increase in a little over two years. During this period, sellers were able to easily cash in, as home prices skyrocketed and the time an average listing sat on the market dipped.
The housing market is still a seller’s market. However, there are a couple of indicators to suggest that the market is slowing down and tilting conditions more in the direction of the buyer, suggesting a less favorable market for sellers than in 2020 and 2021.
The Number of Home Sales Continues to Decline
Pending home sales, which covers transactions that are not yet finalized, fell 20% annually between June 2021 and June 2022, according to The National Association of Realtors (NAR). Lawrence Yun, Chief Economist at NAR, explained that pending transactions will likely stay at this decreased rate for the foreseeable future.
“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” explained Yun. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.”
This is an important trend to keep an eye on because it indicates declining demand for buying a home. This isn’t completely true — demand for homeownership is actually very high, but the ability to purchase a home is lower than it’s been in recent memory. As a result, there are fewer buyers actively purchasing homes compared to previous years.
NAR reported that the average American home was around 80% more expensive in June 2022 than in June 2019, due to rising home prices and high mortgage interest rates. Fannie Mae predicts that home sales in 2022 will come in at 16.2% lower than in 2021. The fact that purchasing a home is out of reach for an increasing number of Americans means that sellers will have fewer buyers competing for their property now than during most of 2020 and 2021.
Home Prices in Major Markets Are Declining and May Continue Over the Coming Year
Home prices continued to grow in the first half of 2022, but at a much slower pace than compared to the previous year. The slowdown is mostly due to a growing number of Americans who can’t afford a home with elevated sales prices and high mortgage interest rates. Last summer, annual national home appreciation hit around 25%, but in 2022, homes have only appreciated at a rate of 8.5%.
As the Fed continues to fight unprecedented high inflation, major markets are showing signs of cooling. With the 30-year fixed rate mortgage rate currently at 5.89%, many buyers struggle to afford a home. Sellers have started to lower their expectations in response to a new reality. According to RealtyHop’s September Housing Affordability Index, median home prices in many cities, including Miami, New York, Boston, Austin, and Sacramento, are declining. Austin, one of the overheated markets since COVID-19, saw a month-over-month decrease of 2.61% in the past month.
A growing chorus of economists and firms forecast a decrease, or potential stagnation, in 2023. Moody’s Analytics published a home appreciation forecast for 2023 and 2024 that predicts of 0% home price growth next year. The Moody’s forecast forecasts appreciation growth for the largest 414 metro areas in the country, with less than half expected to experience rising home prices next year.
Why Now May Be a Good Time to Sell Your Home
Is now a good time to sell your home? Here are some factors you may want to consider.
- Home prices are still high. With home prices expected to stagnate nationally and decline in more than 50% of markets next year, it’s an advantageous time to sell now if possible.
- Homes are still selling quickly even though home transactions are down compared to a year ago. As of August 2022, the average home remains on the market for only 35 days, which is similar to previous years.
- High interest rates will be a challenge for the housing market. With interest rates on the rise and could potentially remain high until 2024, it might be better to sell now than wait, as mortgage rates above 6% are likely to force more buyers to delay their homebuying decisions.
Of course, your financial planning and personal situation matter, too. Here are some reasons why you may want to wait.
- You recently refinanced your home. If you, like many homeowners out there, refinanced your mortgage while the rates were still low during the pandemic, you may want to wait to sell your home. The rate you have secured could save you hundreds of dollars per month.
- Your home is in poor condition and needs some fixup before selling. Since inflation remains high, the cost of fixing up your home for a potential sale may be more than you think. If you are in no rush, it may be better to wait and spread out your renovation to make it more affordable.