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The Housing Market is Hot! Should You Sell Your House to Cash In??

The housing market is hot right now. I mean, it’s freakin’ WHITE HOT! Houses that sold for just $250,000 last year are selling for over $300,000 today. I personally have never seen such a hot market! And now you’re wondering with the absolute insanity…should you sell your house and cash in on the craziness? 

As with most things, it depends on your situation…

Why Is The Housing Market So Hot Right Now?

Before we dig into the question of selling your house, we should first explore why the housing market is so hot! What’s actually going on that’s driving up the price on all these houses?

According to most reports, the housing market is hot for two main reasons:

  1. Low Interest Rates – At this moment, the interest rates on housing are at an all-time low. For a 15-year fixed mortgage, you can lock in a rate of 2.1% right now. That’s insane! And, it’s naturally causing people to buy homes while the interest is at the absolute minimum.
  2. The Need for Space – Covid hit the United States hard in February 2020. Overnight, everyone was basically on lock-down with nowhere to go. While it was once cool to live in a small flat in a populated city, it was suddenly a tiny prison cell with nowhere to venture to. At this point, people are getting itchy, looking to flee their tiny place in the city and buy a sprawling home in the suburbs.

Also, people are finding that they may be able to work remotely on a permanent basis, which means they can keep their swanky city job, but not have to actually live in the city. Heck, they don’t even have to live in the same state! And so, the crazy housing market continues to climb without a peak in sight.

The housing market is hot - should you sell your house and cash in?Will The Housing Bubble Burst Soon?

Sure, the housing market is hot right now, but some get the sense that it’s a bubble and that it’s going to crash. 

I’ve looked at the data. I’ve done the research. And, quite honestly, I don’t think the price of homes is going to take a dive any time soon. (And Bankrate agrees with me…6 times over).

Why won’t the housing market crash?

  • Demand is still up – people still have money (maybe even more so with the latest rounds of stimulus payments) and they want to own a house with some grass to call their own. And, like we said above, interest rates are low, so people want to lock-in on the low rates before they go back up! 
  • Supply is still low – With Covid, the supply of housing materials was severely impacted all around the globe. And honestly, Covid is still making the supply of various goods a challenge. Plus, homes just can’t be built in a day and catch up with demand. It takes time!

If you sit back and are honest with yourself, do you see the demand of housing going anywhere any time soon?

I really don’t.

Remote work will stick with us for a while (probably at least a couple years before nearly everyone finds themselves back in the office), and the interest rates will continue to stay low.

And that just means that more people are going to ditch renting and continue buying!

And do you see the supply of homes growing rapidly?

I don’t see this happening either.

People that have homes are loving the appreciation on their asset, so they’re likely not looking to sell and start renting. And, like I said earlier with the new builds, they can only be built so fast, so the overall supply of houses is going to rise slowly – much slower than the current (and future) demand.

Related: When Should You Invest in Real Estate: Opportunity Coming Soon?

Should You Sell Your House?

Liz and I bought our house in November of 2018 for $275,000. According to Zillow, our house is worth $335,000 today. Over the course of 2.5 years, we could sell and cash in on a $60,000 profit!

how to start saving money with homeowners insuranceBoom! Wouldn’t that be sweet?!

But…where would we go then? 

You might be in a similar situation. The housing market is hot and you might be tempted to sell your house…but should you??

Reasons It May Be Wise to Sell Your House

In our situation, it doesn’t make sense to sell. Sure, the market is hot, but we like our house and we really don’t want to live anywhere else. 

You, however, may be in a different situation. Perhaps for you it does make sense to sell.

Your house is quirky or has issues

Our last house had a roof leak that we just couldn’t solve. Oh, and the sump pump ran every 30 seconds…all year long (I swear we were living on an underground river or something!). We sold that house in a hot market so that people with home-buying hysteria would overlook all these issues. It worked. They bought, and we got the heck out of there!

We did the same thing with one of our rentals. The roof was saggy and the HVAC system only serviced half of the house. Not exactly the perfect house for all interested parties… But BOOM! We sold that for top dollar in a hot market as well.

If you bought your house for a steal because it’s quirky or has some long-term issues, now may be the time to sell. Get big money for the house and then rent for cheap for a couple years somewhere.

Dreaming of a houseYou want to relocate anyway

Maybe you had planned to go to another part of the country, or perhaps you’re getting close to retirement and planned to downsize soon anyway. Now might be a great time to sell.

While the housing market is white hot, you may as well just list it and see what happens. If someone wants to pay you crazy money for your house, let them.

The home no longer suits your needs

Did you recently get divorced? Is the house just to big for you? Maybe it’s too expensive to upkeep? Now is a great time to unload it.

Or, perhaps you’re moving the other direction. Perhaps your house is too small with your growing family. While the larger homes certainly aren’t going to be any cheaper, sometimes when you outgrow a home, it’s just time to move on…hot marketing or not.

Related: How to Sell Your House Without Putting It on the Market

When It’s Unwise to Sell Your House

I have heard quite a few people talking about selling their homes lately, but not for any of the reasons above (you know…the good reasons). Instead, they simply want to sell so they can cash in on the equity!

That’s great and all, but your house isn’t a stock purchase. You can’t just sell it and reap the profits while doing nothing else.

If you decide to sell your home in this hot market, you’re going to run into a few financial snags:

  • Realtor fees – The standard realtor fee is 6%. If you sell your house for $400,000, that’s $24,000 that leaves your pocket and goes straight to the realtor.
  • Closing costs – There are additional costs for title insurance, deed transfer taxes, recording fees, etc. This could be another 3%, or $12,000.
  • Rental costs – Okay, you sold your home…but now you have to live somewhere. And, the housing market is so hot you’re probably not going to be able to find a place right away. What’s it going to cost you to rent a place for 2 years? $20,000? $30,000? More?
  • The premium on the next house – And, since the housing market isn’t cooling down any time soon, when you finally find a house you like, you’re going to have to pay a premium to get it – likely $20,000 over list price (yeah, did I mention the market is crazy hot right now?!! ;))

Get out your calculator. Turns out you’re not selling your home for $400,000. You’re selling it for $400k – $24k – $12k – $30k – $20k… Or roughly $314,000. 

Hmmm, suddenly the sale of your house isn’t all that attractive is it??

Stay where you are. Be happy with the bump in your net worth thanks to your home. After all, your house IS STILL VALUABLE, regardless if you sell it or not!

The Housing Market Will Continue to Go Up – So Hold Onto It

If you don’t have a good reason to sell your house right now, then don’t do it. I don’t care that the housing market is insane and people are shelling out cash left and right. When you’re ready to sell (for a good reason) down the road, people will probably be willing to pay the crazy price of today AND EVEN MORE at that point.

How can I be so sure that home prices will keep going up?

Remember when home prices went down in 2009? Everyone was shocked. No one had ever seen that before. It was a bubble and it burst with a vengeance. 

That was just over a decade ago. Chances are, the banks didn’t forget that lesson. They’re not going to make the same mistake. 

Sure, the market is hot right now, but it’s not because there are a ton of people getting approved that have no business getting loans. It’s because they have solid jobs and have a down payment saved up!

Unless the bottom completely falls out of the economy right now, I don’t see any sort of issue with the housing market.

The story is simple. People want to buy houses, there aren’t many for sale, so the prices are going up.

If you like the house you’re in and didn’t plan to move before this market craziness, then stay there. 

Were you itching to sell your house in this hot housing market? Did I talk you out of it? 

Grow Rich Housing Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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