With the rapid rise in interest rates, homes are becoming less and less affordable. Many buyers have now been priced out of the market. According to Forbes, rates are hovering at 6.67% as of September 27th, 2022! Very recently, rates were less than half of that amount! Home prices increased rapidly, in part, because rates were so low and for so long. Therefore, buyers could afford more. However, with increased rates, the amount that the average borrower can afford is severely restrained.
So what does this mean for you, the homeowner? - You’ve Got 3 Options
Option 1 - Sell
Depending on your situation, you may feel the need to sell. Homeowners are still sitting on large amounts of equity. You will likely still walk away with a significant amount of cash at closing if you can sell your home in this market. If you go this route, make sure to set your expectations accordingly! Last year, you could expect multiple offers and an accepted contract within days. More recently, you can expect your home to sit on the market for some time, you can expect to negotiate with buyers, and you should even prepare to drop your price if necessary. This may be a hard pill to swallow for some folks, but it is a harsh reality. The bottom line? Selling is definitely still an option but you should manage your expectations. Stay informed with the help of your realtor and investment advisor.
Option 2 - Try Turning Your Home Into a Rental Property
More and more homeowners are considering turning their homes into rental properties. Rather than try to fight through this changing market and give up too much to attract a buyer, they prefer to wait it out. In the meantime, they plan to collect cash flow and passive income until the market settles down. If this is something you are considering, make sure you are aware of some of the great benefits of rental property investing! As with selling, it is important to set your expectations before making this commitment. At a minimum, meet with your dedicated investment advisor to become educated on rental property investing. Even if you are a more experienced investor, your dedicated advisor will guide you through the process, serve as your point of contact, and will be available to answer your questions and help you make a decision.
Option 3 - Wait it Out
Perhaps the best action you can take is to take no action! Some would-be sellers are simply waiting it out… Will rates come down in the near future? Will economic trends turn back in favor of sellers? The truth is that no one knows for sure. However, nothing is stopping you from educating yourself on local and national market trends. Consult with an expert so that you can make an informed decision. There is always a chance that it could get worse for sellers before it gets better (some folks are predicting major housing price declines) - but only you can determine if it is better to sell now, rent out your property, or simply wait for the market to settle down.
Because the market has changed so rapidly, many homeowners are shocked to find out that it is no longer a seller’s market. If you try to list your home in this environment, you may be in for a rude awakening (especially if you are on a tight timeline and are hoping to breeze through negotiations). With a skilled professional by your side, you can still navigate this rocky market if you decide to sell. The most important thing you can do is to stay educated! Keep your thumb on the pulse of local and national market trends and consider all of your options! You can always try to turn your property into a rental and you can always consider waiting it out if you are not on a tight timeline!
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