When’s the best time to sell your home? Now. According to a recent study by realtor.com, the week of April 25-May 1 is when conditions are best for selling a home in the San Diego-Carlsbad market.
During this week, competition and demand create the ideal conditions for home sellers. The chart of pending home sales in the San Diego County market shows that May has been the peak month every year for the last five years except last year. 2020 didn’t fit seasonal norms due to COVID, but this year seems to be back on track.
What Makes Next Week the Best Time to Sell a Home?
As in any market, it’s all about supply and demand. Realtor.com found that during this time more buyers were viewing homes. That greater buyer demand helps sellers walk away with higher prices. They say that nationally prices are 2 percent higher than during an average week and 10.4 percent more than they were at the start of the year.
Realtor.com also noted that during the peak week, there were 5 percent fewer sellers on the market than on the average week. This lower supply creates less competition. That combined along with the increased buyer demand also means homes sell 14.1 percent faster than in the average week.
Can’t Move That Fast? Does It Matter?
As we move into the year, the supply-demand situation isn’t quite as favorable for home sellers. Realtor.com says that in the U.S., the first few weeks of May are the most popular times for homes to come on the market. Locally, May was a peak month in three of the four past years (skipping 2020). But as the chart above shows, the number of pending homes drops pretty quickly.
Does this make summer and fall bad times to sell? Not necessarily, but in most years you won’t be able to take full advantage of low seller supply matched with high buyer demand.
This year, timing may be even more important. Due to COVID, our already low supply, high demand market became more extreme. Large numbers of people took their homes off the market or chose to not put them up for sale. A low-inventory market quickly turned into an almost no-inventory market. Interest rates dropped to historic lows giving people more buying power. The large group of millenials and other home buyers who had been waiting years to purchase a home ending up competing for the few homes that were available to purchase. This has been pushing up homes prices at alarmingly fast rates.
Change is in the Air
Markets like the one we are currently experiencing can only last so long. Prices have moved up so quickly during the last year, over 17 percent, that they are pushing some buyers, especially first-time buyers out of the market. With affordability becoming a problem for many buyers, several things could put a damper on this wild ride.
Interest Rates
We saw rates start to rise in March. They’ve settled down in recent weeks, but are expected to continue climbing. Freddie Mac forecasts that the 30-year fixed rate mortgage will increase to 3.4 percent in the fourth quarter of 2021 and move as high as 3.8 percent by the fourth quarter of 2022. Higher interest rates have a significant impact on a buyer’s ability to purchase a home, and fewer buyers equals lower demand.
Increasing Supply
Along with the typical, seasonal increase in the number of homes for sale, more people will put their homes on the market as the population gets vaccinated. Nationally, this trend has already started. Across the country, inventory didn’t decline from February to March at the same rate it had been in recent months. And although we haven’t seen it locally, Zillow reported an increase in new listings from late February to late March. They are expecting that trend to continue.
Forbearances
Another potential source of added supply are homeowners who have taken forbearances. Some of those forbearance plans are now coming due. But if you’re a buyer hoping the market takes a major turnaround, don’t get your hopes up. Homeowners in forbearance may add some inventory to the market as the year progresses, but their numbers have been steadily dropping.
As of April 13, there were 2.3 million homeowners who were still in forbearance plans. Although that seems like a large number, it’s only 4.4 percent of all mortgage holders in the U.S. Some homeowners will be able to negotiate a loan modification or refinance, and most have equity in their homes. The Consumer Financial Protection Bureau has proposed extending its foreclosure hold until 2022. Experts don’t expect widespread foreclosures, but there will be some. Others will end up selling their homes. With inventory as starved as it is, this will help, but we won’t be seeing a repeat of 2008.
If it’s the Best Time to Sell, is it the Worst Time to Buy?
If you’re in the market to buy a home, you may be thinking you should wait. Although waiting may help you avoid today’s incredibly competitive market, it could keep you from being able to buy at all. Home prices are still climbing quickly. Mortgage rates are expected to increase. If you add up the cost of those higher rates along with current price increases, your buying power may be significantly impacted by the end of the year.
For example, if you bought a home in the San Diego area now at the county’s median price of $700,000, put 10 percent down at last week’s average 30-year, fixed interest rate of 2.97 percent, your monthly mortgage payment would be $2,645.92. If you wait until later this year, and homes have appreciated 5 percent with mortgage rates rising half of a percent, your monthly mortgage cost would go up by $313.44 per month to $2,956.36, and your home would cost you $735,000.
I’m Here to Help
If you are looking to sell a home or to buy one, I can help. Whether now is the best time to sell or buy or it’s sometime in the future, I’ll work with you create optimal strategies to get ready for your next move. Contact me today for a complimentary consultation!
The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.