Covid, Protests, and Real Estate: Should I Sell My Home While I Can?
Broker and owner of Artisan Haus Real Estate, with 10 years of experience in residential, commercial, and investment transactions.
A knee-jerk reflex to sell your home immediately following catastrophic events or crises before the market collapses in a time of economic uncertainty is definitely understandable. However, there is an ebb and flow, a boom and bust - and a rhythm to the real estate market that is regular, cyclical, and repetitive. Knowing this rhythm can relieve you, lessening your anxiety. Unlike the very sensitive stock market, which can change overnight, the real estate market is less sensitive and drags its feet a little (longer). It lags a bit farther behind the sensations that grip the nation from month-to-month (or, as it seems these days, week-to-week).
What is the real estate market's lag period and what are the basic (or fundamental) indicators that deserve your full and undivided attention?
1) 3 SEASONS
Season 1 - Summer Is For Selling
When a real estate market collapses, it does not happen in the summer. There is too much at stake - especially for families moving around and situating themselves throughout the land. It better not collapse or crash then. And you better not get in their way. In this frenzy, families will “go the extra mile” above and beyond any other buyer types to accommodate their offspring and their educational lifestyle needs. (Thank you, American families, for keeping us balanced and on trend. Year after year.)
Summer is selling season. It's hot. And it's fast. Blooming flowers fill out the yards of pristinely appointed homes, photographers (and drone operators) capture the essence of homes nestled in the lush of God's greenery. As a result, the aesthetically overwhelming visuals attract not only bees, but buyers. For many families aiming to situate themselves into the best school district or award-winning program, their buying window of time is only 4 months. And that's a lot to achieve in 4 months, especially between jobs, vacations, and the general mixture of familial angst. After mid-April's tax returns are filed, and they finally have the pre-approval letter in hand from their favorite lender, it is go time—and they better be in place, moved-in, and school lunches packed. If not, mid-August sneaks up on them, and the big yellow bus arrives to transport their child into the world of educational wonder.
Season 2 - Winter Is For Buying
Winter is buying season. And winter starts in October (ish). Don't get me wrong: September can still be a seller-favoring situation for those straggler buyer families who couldn't make up their minds during the inventory stocked summer. But they “missed the (school) bus.” And they are trying to make up for lost time so September deals are quick. Painless. And to the point. Around the corner, once the scent of turkey begins to permeate the households of our thankful nation, families and buyers of all types fall asleep and begin the long winter of hibernation. The cash-heavy investor comes out to feed on the leftovers from the summer market homes that failed to position properly with sellers huffing and puffing with frustration—with last attempts to sell and buy a new home before Christmas holidays. General anxiety sets in to start the year on new terms, new resolutions—and, where better, to achieve all of that than in a newly purchased home having let go of your “old” life—your “old” home.
Season 3 - Investing
January to April is “no man's land,” the “dire straits,” and the season of “low-ball galore.” Some remember a great Christmas; some a bad one. Some found a job; some lost a job. The recovery period felt by many men, women, and families right after the great holidays is also often turbulent. And, with the whole year ahead of them, why make decisions right away on a new home purchase? And perhaps their financial situation improved over the year, so why not just wait until the upcoming April tax season to prove it? And again, along comes the cunning investor, preying on the frustration of sellers who may have been hesitant to sell, improperly positioned in the market and now having reduced the property so much that it's practically a giveaway, and buyers who continue to wait until April so they can “afford more house.”
2) KEEP AN EYE ON THE MORTGAGE MARKET
Stronger Due Diligence
Ever since the home price index drop of December 30, 2008, also known as the Housing Bubble or the 2008 Market Crash, lenders have been doing a much better job of underwriting both the buyers and their chosen homes. Wishful financing has disappeared altogether, and banks have been treating lending like their life depends on every mortgage—and, quite honestly, it does. The strength of the buyer has gotten a lot more attention from loan officers and mortgage brokers. And appraisers have been known to fight tooth and nail to get the property value “right”—with FHA and VA appraisers especially sometimes knocking just several thousand dollars off to make sure the purchase price “aligns” with the market. Well I would too if I were lending 96.5-100% loan to value.
When Interest Rates Rise and Fall
It's no secret that banks are in the business of lending. If banks don't lend, they don't get paid. And banks must lend. If interest rates are very low, homes are not selling. Banks want you to borrow so they make mortgages more appealing. If interest rates are high? Well, there are plenty of transactions going on and they don't need your money. By watching the direction interest rates trend shows which way the housing market is going. So, higher rates actually mean the market is doing well; banks are not desperate to lend, and all is well in the lending world—and all is well in the actual world. Seriously.
3) DRIVE AROUND NEIGHBORHOODS & NEW CONSTRUCTION PROJECTS
When a market is declining, new construction stops. Simple as that. Investors, realtors, developers, engineers, builders, lenders, stagers, and photographers all team up to determine if a new home is “worth” building. If it's worth their collective headache to architect that new stylish and trendy abode from which you will enjoy morning coffees, then they deem the matter worthwhile. And they make money—handsomely. Nobody works for free, especially not realtors. New home construction projects are watching out for you—for your good—and for your financial health. And you didn't even know it. For free.
So, you're still asking yourself: “Should I Sell My Home While I Can”, then here's what to do:
1) keep an eye on healthy mortgage rates - if they are too low, then be alert
2) watch for how many homes are going under contract - it there are too few, then be alert
3) watch for new construction projects in neighborhoods - if there are too few, then be alert
If you are seeing only 1 out of 3 is true, then relax. If you see 2 out of 3 are true, then be watchful. If you see that 3 out of 3 are true - then be alert, but only if it's summer.
Otherwise, just enjoy your home and everything will be okay.
Andrei Leon is the broker-owner of Artisan Haus Real Estate in Atlanta, Georgia. Connect with him via email at firstname.lastname@example.org