Few people are predicting that 2020 will be a record-breaking year for home sale prices.
But relatively speaking, 2020 might be the best time to put your house on the market. Especially if you're on the fence about selling this year or next, it may be better to sell in an environment that's more predictable, rather than wait for time to pass and circumstances to change.
Ryan Gorman, president and CEO of Coldwell Banker NRT, predicts that the housing market will be "increasingly healthy" in 2020 -- meaning home prices will continue to rise, but at a moderate pace. This means homebuyers are less likely to face affordability issues, and there will be a better balance between supply and demand for housing than in previous years when supply was limited.
If you bought your house in the past few years, still love it and don't want to part with it, go ahead and wait another five years before revisiting the thought of selling. But if you're weighing your options to sell and are considering selling this year or next, don't play the waiting game.
Here are four reasons to sell your house in 2020:
-- New buyers are still entering the market.
-- Interest rates are expected to remain low.
-- You have high equity.
-- There's no telling what 2021 holds.
New Buyers Are Still Entering the Market
If your house is at the higher end of the price range in your market, you should expect less buyer interest than in previous years. If your home is considered in the entry-level or midlevel price range for your city, however, expect to have interested buyers eager to move quickly.
The biggest wave of new homebuyers will continue to be millennials, who are mostly first-time homebuyers. But depending on where you live, you may see the youngest generation of adults breaking into homeownership as well. Members of Generation Z, born between 1996 and 2010, are largely still too young to make up a significant portion of the homebuyer market.
But Gorman says he's already seeing small numbers of Gen Z homebuyers buying in more affordable Midwestern cities, "where home prices have grown, but not as dramatically," such as Des Moines, Iowa, and Omaha, Nebraska.
Interest Rates Are Expected to Remain Low
Interest rates are expected to remain low throughout 2020, which will help new buyers obtain financing for their first home purchase. The Federal Reserve left interest rates unchanged in December 2019 with the target range of 1.5% to 1.75% and noted its intention to keep rates as-is throughout 2020.
While the Fed's recommendation plays a role in mortgage interest rates, the interest rate lenders offer to homebuyers varies based on the individual and the market. On Jan. 2, the average interest rate for a 30-year, fixed-rate mortgage was 3.72%. While some fluctuation is expected throughout the year, Daryl Fairweather, chief economist for national real estate brokerage Redfin, predicts mortgage rates will stabilize at about 3.8% this year, which is still low enough to encourage buyers to enter the market.
"It's basically setting the stage for a continued rise in home sales," says Reese Stewart, a real estate agent with Re/Max Properties SW and president of the Orlando Regional Realtor Association in Florida.
Low interest rates aren't just a helpful nudge for would-be buyers to consider your home for purchase. As you look to your next home purchase, you can likely secure a low interest rate as well.
You Have High Equity
If you've been in your home for more than a couple years, you've been building equity as the property value increases and you make consistent mortgage payments. The more equity you have in your home, the more profit you'll likely see when you sell the property. That, in turn, can be used for a larger down payment on your next house, other expenses or savings.
"Especially for someone who bought post-recession, they're in a good place to sell right now," Stewart says.
Whether you're hoping to step up into a larger home or a more desirable neighborhood, significant equity in your current home can only help, making you a more desirable prospect to both mortgage lenders and home sellers considering offers.
But you'll likely need to sell your current home before closing on a new one. With this in mind, Wendy Gilch founded Selling Later, a real estate marketing platform that allows homeowners to post their property information and photos prior to listing it for sale, noting the planned listing date. This service, launched in Gilch's hometown of Pittsburgh but now available nationwide, can help sellers figure out their timeline over the next few months.
"That dream home down the street is selling in June -- maybe that's a good time to put your home on the market," Gilch says.
There's No Telling What 2021 Holds
According to the National Association for Business Economics Outlook Survey for December 2019, none of the 53 professional forecasters surveyed expect a recession in 2020, though GDP growth is expected to slow. On the other hand, 2021 is a different story: Respondents estimate a 66% chance of a recession starting by mid-2021.
There's no need to fear a massive housing crisis like the one that occurred in the last recession, which lasted from December 2007 until June 2009. Home values may dip during a time of economic uncertainty, especially in areas where job loss is significant, and the number of foreclosures may increase during that time. But as long as you can continue making mortgage payments, you'll be fine.
During a recession, however, you'll be less likely to want to put your home on the market at a reduced price unless it's absolutely necessary. So if you're starting to feel the itch to move, consider selling this year as opposed to next, because economic changes may make a home sale in 2021 less desirable.
Keep in mind, however, that you still have time in 2020 to make necessary updates to your home, prepare for a move and find the right new property. Rather than putting it out of your mind, start preparing now.
"In some markets, (sellers and buyers) have under 50 days to do everything," Gilch says. If you starting planning months in advance, however, you may feel better prepared to ready your home for sale -- and you won't feel pressured to make a snap decision.
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