Amid rising home values, is now the time to sell?

Sellers have the upper hand in 2021 but some homeowners are still choosing to wait before putting their home on the market. (iStock)

After a booming year, the housing market shows no signs of cooling down. Low mortgage interest rates, strong demand and a limited housing supply have caused home prices to skyrocket. Through the fourth quarter of 2020, every major metro tracked by the National Association of Realtors saw home prices increase from the previous year, with 88% of metro areas seeing double-digit price increases.

When considering if they should sell a home, many sellers consider national median home prices, days on market, interest levels from home buyers and general market conditions. Because of rising home values, home sales have increased as many homeowners are considering selling their homes amid the current real estate market. However, despite being able to get top dollar due to rising listing prices, some homeowners may still decide against selling and moving again. 

Before buying a house, use an online mortgage calculator to determine potential monthly payments.


If you sell high, you may have to buy high 

According to data, as of the week of April 3, 2021, median listing prices grew 17.2% year-over-year, marking 33 weeks of consecutive double-digit price growth. Additionally, total active housing inventory continues to decline, dropping 53% over the past year. 

Compared to the pre-pandemic housing market, home values are much higher and home sales have the upper hand. Low housing supply has meant that buyers have had to outbid one another to get their offer accepted, further accelerating home price growth. 

In December 2020, buyer demand caused 49.7% of home offers written by Redfin agents to face bidding wars nationwide. This represented the eighth straight month in which half of Redfin offers encountered bidding wars. 

Although sellers might be able to make a considerable profit on their home sales, buying homes in this market will be costly. The low mortgage rates might not be worth the extra cost. Visit an online marketplace like Credible to use an online mortgage calculator to determine your potential monthly payments.

You recently refinanced and haven’t recouped the costs 

Low mortgage rates in today's real estate markets have spurred a surge in mortgage refinances. There’s nothing stopping you from selling your home shortly after refinancing. However, it’s rarely beneficial to homeowners due to the costs of closing on a home mortgage refinance. The average cost to refinance is $5,000, according to data from Freddie Mac. Common closing costs when you refinance your home include:

  • Application fee: $75 to $500
  • Origination fee: Up to 1.5% of the loan amount
  • Credit report fee: $30 to $50
  • Appraisal fee: $300 to $400
  • Inspection fees: $300 to $500
  • Attorney review and closing fee: These fees vary widely by state
  • Title search and insurance fees: $400 to $900
  • Recording cost: $25 to $240
  • Reconveyance fee: $50 to $65

Even with today's mortgage rates, the money saved after a mortgage refinance generally isn’t seen for several months after closing. Selling within a few years after refinancing doesn’t make much financial sense for the homeowner, according to Freddie Mac's numbers. 

You can explore your mortgage refinance options by visiting Credible to compare rates and lenders.


Closing costs could eat into the profit on the sale of your current home 

Closing costs on home sales typically range from 2% to 5% of the loan amount and are similar to the cost and fees of a mortgage refinance. This means that on a house price of $300,000, closing costs can range from $6,000 to $15,000. In some cases, the profit from your home sale could more than cover the cost of closing and other expenses. This isn’t always the case.

When a home is sold, sellers have to pay off an outstanding mortgage and liens, as well as the closing costs, commissions owed to the real estate agents and any repairs negotiated with home buyers. If the seller doesn’t have enough to pay all of this from the sale of their home, they will need to make up the difference. 

Is 2021 a good time to sell?

It’s a great time to be a seller, but you might have a hard time finding a new house due to the limited housing inventory, home price growth and high buyer demand. In this market, you need to make sure your offer stands out and that you’re in a strong position to secure an affordable mortgage. The housing market is tough for homebuyers right now, but that could change as we go further into the year. Keep an eye on the housing market to make sure you’re making the best decision before you sell your home. 

Visit Credible to get in touch with experienced loan officers to get your mortgage questions answered.

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