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House Values Rise – Is It Time to Sell?

Have you noticed the increase in demand for housing lately? As a homeowner, I sure have. I bought my house in August 2011, which happened to be the best  time to buy when looking at home prices, and now I’m wondering if the housing market has reached a peak. So is it time to sell? Before I can answer that, let’s look at a few factors.

Why is Demand High Right Now?

There are a couple of reasons for the increased demand for housing recently.

1) U.S. citizens are becoming more comfortable with the economic recovery. There is obviously quite a long way to go for us to make a full recovery, but people seem to be more certain of their job security and their financial state these days. When these two factors fall into place, people begin to gravitate toward home ownership instead of throwing their money away in a rental unit. After all, home ownership is the great American dream, right?

2) The second (and perhaps most influential) reason for an increased demand in housing is the interest rates for home loans. The average rates for a 30-year home mortgage were as low as 3.46% back in January 2013, but more recently the rates have risen to 4.46%. With this rate increase, potential home buyers have suddenly become much more serious about a home purchase. Chances are that the rates will not go back down, but rather they’ll just continue to climb. So, the sooner they’re able to purchase a house, the better.

These factors have really contributed to an increased demand in housing over the past month or so. With this increased demand, and with an unchanged supply of houses, the amount that buyers are willing to pay for real estate has skyrocketed by 10% this year. I had a friend that found a great house to buy. They knew that there were other parties that were interested in the property, so they put in an offer that was $10,000 more than the seller’s asking price. Long story short, they still didn’t get the house. Because of the increase in demand, there were other families that bid an even higher price on that property.

Is It Time to Sell Your House?

As I stated earlier, I purchased my house in 2011. I paid $75,000 for it, and after nearly $20,000 worth of improvements the house is nearly complete in its renovation. With the recent increase in demand, I figure that I could put my house on the market for $125,000 and it may sell rather quickly. That would give me a nice $30,000 profit, which makes it incredibly tempting to sell! But, there are a few reasons why I might want to stick around in this house, and why you might want to keep your house off the market as well.

1) Future Gains – While it seems like the housing market is gaining in value rather rapidly, they home values are still not at the level that they once were in 2006. As far as the experts can tell, there is no sign of the bubble bursting on this market any time soon.

2) What to Do Once You Sell? – Yes, you might be able to get quite a lot of money for you house right now, but then what are you going to do? You’ll most likely be forced to buy another home that also has a high price compared to last year. So what is your net gain? Absolutely nothing. The only time you should sell is when you think the market has reached its peak value and will soon decline.

3) Location, location, location – One of the reasons you bought your house in the first place was probably its location. For me, I’m directly across the street from the park, a half a block from the local swim/exercise center, and only two blocks from the local hospital. The location is excellent and I might not be able to find another house with all of the perks that this one has.

4) Increased Interest Rates – More than likely, if you sold your house and bought another, you would need to reapply for a new loan. With the increased interest rates, you will be paying more for your new house than you would have for your old house.

There are obviously reasons not to sell your current residence, but what are some good reasons to put it on the market? As I mentioned above, if you think that the housing market will soon tank then it might be worth selling your house and renting a cheap property until the valued bottom out. Second, if you’d like your home to be more of an investment, perhaps it would be wise to sell your single resident home and purchase a duplex or quadplex so you can rent out the other available units in your complex. Finally, if you are considering a move to another area, it would obviously make sense to put your home up for sale when the market is hot.

So what do you think? Would you put your house up for sale right now?

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21 comments to House Values Rise – Is It Time to Sell?

  • I think that the ‘What do you do once you sell?’ question is probably what’s keeping even more people from listing. My wife was amazed at how much prices in our sub have gone up over the past year, and what we could likely fetch, but she lost most of her excitement when I reminded her that even if we sold, we’re likely going to pay a premium (compared to last year) in anything we look at.
    Money Beagle recently posted..A Simple But Effective Way To Clean Pet Stains From Carpet

    • Exactly. Pretty much it only makes sense if you find a steal of a deal, or if you really think the market is going to tank and plan on renting for a couple of years.

  • We’re not looking to sell, mainly because we’re not certain what we would do after that. We’re not really in the position to buy right now and with the way prices are going in our area we could stand to make even more – especially if we add in a few more upgrades.
    John S @ Frugal Rules recently posted..In the Blink of an Eye

  • The problem with selling is where do you go? If you stay in the area and down size. you are using the same inflated dollars. If you go to a lower cost area, you may have some savings. When I downsized, I invested my proceeds and it grew faster than housing.
    krantcents recently posted..Why using your Facebook Friends to get referred into jobs beats job boards

  • You could sell but then you’d have to buy again so unless you are downsizing which doesn’t always mean cheaper or moving to a cheaper city it may not be worth it. Our house is up over $100K since we bought it in 2009 but moving only means it will cost us more money. Since we have the cash to pay our mortgage in full now we will stay here for a bit longer, save up the cash to slap down on another house with more property and hope the prices are just as good but it’s all relative either way.
    Canadian Budget Binder recently posted..An introduction to investing- part two

    • What if you bought a fixer-upper? Do you think you could get a deal that was technically below market value, even when factoring the cost of bringing it back to life?

  • Mortgage payments as % of income reached in a peak in late 1989/90 due to record high interest rates. Rising house prices meant that the % of mortgage payments grew in the 2000s. However in 2009, interest rates were cut to 0.5% leading to lower mortgage payments for homeowners.
    Lucia Nolan recently posted..No last blog posts to return.

  • We are looking for our first house. We still have 6 months on our lease, so we are crossing our fingers for a foreclosed home. I check the listing at hudhomestore every day. We just started. We saw a house last week.
    Our goal is to buy an foreclosed home we can add equity to it by doing our own upgrades.
    SavvyFinancialLatina recently posted..Ways to Have Fun Without Dipping Into Savings

    • My house was a foreclosure and the close happened fairly quickly. I’d say that you still have some time. If, however, you’re looking at short sales, that’s another story.

  • It’s the same situation as Japan in the early 90s. If you owned a house, you were rich, but if you sold the house you’d better be willing to leave the area if you wanted to enjoy the money, because you’d spend that much or more getting a new house.

    I think houses are a funny “investment” like that. You can’t easily take profit when you might want to.
    Alex @ Searching for Happy recently posted..Happy Thought of the Day: The Hail Mary

    • Very true Alex. It’s incredibly hard to truly make money off of that “investment”, which is probably why you really shouldn’t think of it as an investment at all. Maybe one option would be to sell the house and purchase more of a true investment property – like a duplex or quadplex.

  • Don’t try to time the market. No one knows what is going to happen. Housing prices could be anywhere 2 years from now.

    Just live your life and move where you can find work or enjoy the area. Don’t expect to make a fortune in real estate unless you’re willing to devote your life to the pursuit!
    Derek | MoneyAhoy.com recently posted..How to Setup a Blog for Fun or Profit

    • Very true. While it’s unlikely that housing prices will skyrocket again, they still have a chance to go up in value quite a lot. I think I’m more interested in renting out my house anyway (trying to think long-term vs. the short term).

  • I’m not sure that because home prices are going up is the best and sole reason to sell a house. I think if you need more room, need to be closer to work, or some other reason like the neighborhood is sketchy, those reasons would compliment “the market is improving” reason. I think I’d weigh all the pros and cons.
    Little House recently posted..Projects Put on Hold

    • Good point LH. I did consider moving about 15 minutes east to get closer to work, but if I get promoted I might work in another building anyway, which happens to be about 4 minutes from my house. So….it’s probably best if I stick around in this area. ;)

  • I say keep the house Derek, maybe refi it, pull some cash out and invest the cash. That way, if you like the house and where it is located you can keep it for about the same payment, but by stretching out the payments, you can get a better interest rate (cheap money for a long time) and then leverage by investing in something else. Just a thought!
    Jim recently posted..Windturbines: Great For Wind Energy, Not So Great For The Rare Bird Population

    • I’m actually thinking about doing exactly the opposite Jim. Yes, I’ll probably keep the house, but I think I will make additional payment and pay off the entire mortgage. Then I can reinvest in other ventures with my increased cash flow each month.

  • [...] starters, Derek at lifeandmyfinances.com wonders if it is time to sell real estate,thinking that the market may have peaked and values are elevated.  What do you [...]

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