Since none of us have a crystal ball (that I know of), you can’t be certain exactly what the market will do next. Here are some possible situations:
1. The market will find a short term peak and stay stagnate for a while. This means buying and selling activity will be neutral and prices will remain stable with no huge swings up or down. This is the scenario that seems to be the most probable.
2. The market will wake up again during spring time and buying will outpace the properties available and prices will rise, either gently or more rapidly. With interest rates up about 50% (rates for the 30-year Treasury Bond grew from under 2.60% in July of 2012 to about 4.00% at the end of 2013) in the last year and mortgage applications hitting a 10 year low, this scenario might have some obstacles.
3. The market will slow down and houses hitting the market will out-power the buyers looking for, and getting approved for a bank loans, causing prices to reverse. There are different factors for this to happen, such as the interest rates and mortgage applications mentioned in the previous scenario, or if the US goes into another recession (since recessions usually occur every 5-7 years and the we haven’t had one since the last one ended in 2009). This would put stress on Real Estate and trigger a decline of prices. Entering a recession right now might not happen this year, however, you should be prepared for one in the near future.
So what should do given these possible situations?
The first thing to think about is reality. Don’t expect the markets to keep moving up in a straight line. Many sellers kept holding on the houses they wanted to sell in 2007, hoping to get the best price possible (many of us included), and found ourselves stuck with properties that wouldn’t sell for any price. Keep that in mind in this market. If you want or need to sell, and can lock in a good price, it would make sense to take it. Rarely does anybody sell at the absolute top price possible.
Another factor to consider when deciding to sell is this: does it make good financial sense for you to do so? If the price you can get will cover what you need and allows to you to get out of the property, you will have gotten a fair market price and improved your situation.
And finally, while mentioned earlier, no one knows what the future will hold. Markets are inherently volatile these days. It’s good to have a backup plan to in case you have to sell your house, either now or in the coming months. If mortgage applications suddenly dry up for any odd reason, and those who want to buy are unable to get a loan, how will you sell?
To answer that final question, here’s something to keep in mind:
Be open to creative solutions.
One that is particularly effective in solving the problem of an unsold house is a lease option (or rent-to-own). This is when you find a tenant-buyer who wants to purchase your house, but, for some reason or another, needs more time to get qualified. It could be due to not having enough down payment save up yet, or some minor credit issues they need some more time to resolve. The reason this is such a powerful strategy is that this pool of “secret” buyers far outweighs the conventional all cash buyers or those who have 20% down and perfect credit. These tenant-buyers have good jobs, stable families, and want the participate in the American Dream of having their own homes. They just need some more time to qualify.
The benefits of selling your house with a lease option are huge. First off, you get full market price without having to pay up to 10-12% in commissions, fees, and closing costs. Second, the way a good lease option is set up, the tenant-buyers are responsible for all the day-to-day repairs and management. Which is big, since these folks see the home as theirs, not just another rental to trash and move on to the next (as would be the case if you were just renting the place out). And finally, the tenant-buyer is motivated to pay on time, every month, since they don’t want to lose their ability to lose the house before they can purchase it from you outright.