Does the Cooling Market Mean You Can’t Still Get a Historically High Price for Your House?
If you’ve been thinking about selling your house, you’ve probably heard that the market’s cooling off, or “resetting” (as Federal Reserve Chairman, Jerome Powell, recently put it.) So you might be wondering if that means you won’t be able to get as much money for your house as your neighbors did a few weeks back.
On the other hand, there are still reports that house prices are still rising, like in this realtor.com article, which makes you wonder if you could actually get more money than they did!
So, what’s the truth?
There’s no one-size-fits-all answer to that question. Real estate functions on a very local level, and much of what you read is referring to the broader, national market. Not only does the general area you live in matter, but the specific price range or neighborhood your house is in can affect whether or not you get more or less for your house.
For instance, if your house is in a price range for first-time buyers in your area, the higher interest rates could easily affect how much buyers are willing or able to offer. On the other hand, if your house is in an affluent area and there are a lot of cash buyers, prices may not be affected as much. And a lot depends on how many homes are for sale—if there is still low inventory in your area, and a lot of buyers, then prices may stay strong.
While pricing your home appropriately is always important, it’s even more important to do so in this market. You obviously don’t want to price lower than you have to if the market data doesn’t show signs of lower sales prices, yet you don’t want to shoot for a record-breaking price and have your house sit on the market and not sell.
The problem is, when determining the value and list price for your house, you have to rely on recently sold homes as your proof and basis. The houses that are considered “recently sold” were on the market a few months back. And with the market reportedly shifting, that’s ancient history when you consider how much interest rates have gone up in the past few months, after those homes went under contract. Until the houses that went into escrow between then and now actually close, it’s a guessing game as to how much they actually sold for.
So, here are some thoughts to help you think about if you’re putting your house on the market in the near future:
- Price based upon recent comps, but be ready to reduce. Base your asking price off of recently sold houses that are similar to yours. But pay close attention to how the market reacts over the first couple of weeks. If it appears buyers aren’t going to make offers, you may want to consider a price reduction.
- Give it some time. Sellers have gotten used to houses selling in mere hours or days, not weeks or months! If yours doesn’t, that doesn’t necessarily mean that buyers think your house is overpriced. As the market shifts, it may just take more time for a house to sell. But generally speaking, you can get a sense of how buyers feel about your price within the first couple of weeks of listing your house in any market. So, give it a couple of weeks to a month and assess your pricing at that point. If buyer reactions and any new data available at that time point to a reduction, then consider doing so.
- Interest rates do and don’t matter to sellers. There’s a lot of talk about interest rates affecting the market. The interest rates affect how much it costs borrowers per thousand dollars borrowed. So, in a sense, that’s not your problem to deal with. They have to deal with how much they can afford to spend, and what is available for that amount. As long as there are buyers in your area and price range who can afford what you’re asking and are willing to pay it, their interest rate doesn’t affect you. However, if current buyers aren’t willing to pay as much for your house as previous buyers might have because their dollar isn’t stretching as far, then it does affect you.
Be aware that interest rates have gone up considerably, and may go up more over the coming months. But more importantly, be aware of how much that is affecting the buyers in your area and price range. Just keep in mind, the Fed is actively trying to impact the real estate market by adjusting rates, so if you’re on the fence about selling and worried the rates will affect the value of your house, you may want to do it sooner than later.
The real estate market is shifting in many areas, but that doesn’t necessarily mean the value of your house is affected—at least yet.
If you’re going to list your house soon, you have the advantage of basing your asking price off of recently sold houses that are similar to yours, which were likely at historically high prices. Just make sure to keep your eye on the reaction of the market and any new sales data that comes in over the course of the first couple of weeks to a month. If there are no offers on your property, or signs of interest on the part of any buyers, then consider reducing your price.