Should I Sell My House Now or Wait?
It’s the question on everyone’s mind in 2021. Should I sell my house now or wait for 2022?
I won’t keep you in suspense. I’ll say it now that if you have the means, I think you should not sell your house this year and I’ll give 3 reason why you should think twice before selling your house in 2021. All of them affecting the simple law of supply and demand.
When there is low supply (or less sellers) and high demand (more buyers), prices will increase to meet the demand.
Reason #1: Government Manipulation
As we saw COVID unfold, the government stepped in to prevent total collapse of the economy. I’ll list the ways they did this and explain each of them briefly.
Interest Rates – The Federal Reserve lowered interest rates to zero in 2020. This means that it is cheaper to borrow money. As an example (with fake numbers), let’s say your home’s monthly payment is $1,000/month and $500 goes towards paying down the loan, the other $500 goes towards the bank as interest (or profit) to the bank. If interest goes lower, now the same house only cost $900/month because $500 goes towards paying down the loan and $400 towards the bank as interest/profit. This is why we saw so many people refinance their house last year.
This is also why there was a buying frenzy last year. People could suddenly afford more house on the same budget. The home sellers knew this, so they rose their prices to meet demand.
Stopping Foreclosures – A lot of people lost their jobs last year and were left holding the bag on their mortgages. Under normal circumstances, people unable to pay their mortgage would go into foreclosure. However, the government passed policy to allow homeowners to defer their payments to the end of their loan or work out other ways that would prevent homeowners from going into foreclosure.
This was necessary to keep the housing market from collapsing. The byproduct is that fewer houses went into the market. Remember the law of supply and demand? Lower supply in the market, coupled with increased demand by interest rates means that prices increased.
Here’s the kicker: Both of these policies are set to continue through the end of 2021. This alone means that prices should continue to increase and is reason enough to hold on to your home.
But I’ve still got two more reasons why I think I should wait to sell my house.
Reason #2: Inflation & More Jobs
This kind of goes into a third point of government manipulation, but I’m stating it here to go with the overall point that there is a lot more money in circulation due to the government printing money. Additionally, COVID is coming to an end, people’s jobs are coming back and people are earning money again. Let’s talk about how these two factors will increase the price of your home in 2021.
Money Printing and Inflation – Let’s imagine that you, me and a chef all have $1 between the 3 of us. That $1 can be exchanged for something of value like the chef’s hamburger. Now because there is only $1 in circulation it is very valuable. It’s as valuable as that hamburger and the chef provided a service to earn that dollar and all the money that is in circulation. But now let’s push $8 into circulation between all of us, in addition to that $1. Now we all have $3.00. Is that burger still worth $1? No, the burger is now worth $9, it is still worth the value all the money in circulation.
So how does that affect house prices? Basically this means that the price of your home is still worth the same value, but the dollar is worth less (or worthless). It takes more dollars to purchase the house. These numbers aren’t exact, but about twice as money was pushed into circulation since the start of 2020, as there was already in circulation. Which means that your house is going to take twice as many dollars to buy it, because each dollar represents a lower value. If your house was worth $200,000, you could expect it to climb to $400,000.
All that being said, inflation takes time. Nobody knows how long it will take to climb to that level, but the direction is set. The value of your home will increase.
Jobs – Not much explanation needs to go into this. COVID is (prayerfully) going down in occurrences and people are getting back to work. This means more dollars in people’s pockets, more buying power into the people, more buyer’s entering into home purchasing market.
So looking back at these two, people need more dollars to buy houses and they’re getting those dollars from their jobs. This is increasing the demand on the buyer’s side further, and the result is increased home prices.
Reason #3: Record Low Inventory
There is record low inventory of houses on the market, take a look at the chart below supplied by Redfin.
Inventory is the same thing as saying supply. Low supply means that prices will rise due to increased demand.
Really not much more to say outside of this chart. There are just as many people (if not more) buying houses today and there are fewer houses. Those that are left are chomping at the bits to buy a house and they’re willing to pay more to get the money.
So let’s revisit our original question: Should I sell my house now or wait?
I’ve presented the above 3 points, with additional sub points. On top of it, there is no reason in sight as to why the prices would come down. Interest rates are staying low through 2021, eviction moratoriums and forbearances will continue through 2021, inflation is around the corner, people’s jobs are coming back and inventory is at record, historic lows.
All of this surrounds the law of supply and demand, and this indicates a continued rise in home prices.
But what if I can’t wait?
I stand by what I said, I think you should wait to sell your house. But being in this industry, I know that’s not realistic for everyone. Some people know they won’t be able to climb out of the foreclosure or forbearances they’ve entered into, people still get divorced, people still relocate because of jobs and, sadly, people still die. All of these lead to reasons why someone should sell their house now, rather than wait.
If you’re asking yourself, “Should I sell my house now?” and you’re in a tough situation like this, or any situation where you need to sell your house fast, fill out a form below or give me a call. I’d love to be your home buyer.