Should I Sell My House in 2021 and Rent Until the Market Cools Down?
The Arizona housing market is all over the place. With homes in many hot areas selling for sometimes as much as fifty percent over asking price, it makes one wonder: should I sell my house and rent until the market cools – then buy my next place?
Renting right now has its own benefits and consequences as you wait out the market. The answer on whether you should rent depends on your unique situation and outlook. First, we will cover why renting after you sell could be a big mistake.
Five Reasons You Should Sell Now and then Buy Again:
01: You can’t time the housing market.
Everyone wants to know when’s the best time to buy a house? The market could cool off at any time – and of course you want to be ready when that happens. Keep in mind that many home buyers from two or three years ago were waiting for the market to cool down only to find themselves priced out of the market today.
Many of the homes for sale in Phoenix, Scottsdale, Gilbert and other Arizona cities in 2017 were thought to be “too expensive” or “overpriced” by local home buyers, so they decided to wait. Additionally, the COVID-19 outbreak in 2020 gave home buyers a false sense of a depressed seller’s market. Even the housing market experts could not predict how the inventory would be affected.
In Spring of 2020, market conditions in New York were televised nationwide showing how COVID-19 has damaged real estate sales. This was clearly not the case in Arizona. There was absolutely no evidence that waiting for the market to cool down was the correct path to follow. Home buyers from California and Washington began to flood the Phoenix market, causing housing inventory to seriously decline and listing prices to jump.
In fact, several experts from CNBC were calling it “a better time to rent than to buy” in 2018. They even went as far to say that sellers were beginning to see a decrease in demand because buyers couldn’t afford homes at their current prices. The median home listing price in Phoenix was $297,000 in May 2018. In 2021, it’s now approaching $390,000 and continues to rise.
One of the largest drawbacks of renting while waiting for the housing market to cool down is risk. I can’t tell you how many buyers told me that they’re going to hold off and rent until the market cools down.
After a few years of paying their landlord’s mortgage, those same renters have been priced out of the housing market and are now at the mercy of another market – the rental market. Recently, Phoenix has experienced significant increases in average monthly rent coupled with low inventory. Buyer’s must ask themselves whether they should wait for the market to cool. It’s all about how comfortable they are with the risks.
“When you rent, you have no control and you’re paying the landlord’s bills. You don’t even have the chance to create equity. Worse, your landlord could sell out from under you anytime, leaving you to compete with thousands of others for another rental that in many cases could cost you more in monthly rent than actual mortgage costs,” notes Phoenix-Area Realtor Troy Elston.
“If you think timing the stock market is hard, timing the housing market might be even harder. Each home comes with its own landmines that could blow up your thesis on the housing market overall.” – awealthofcommonsense.com
02: Mortgage rates can only go up from here.
Over the last few years, we have enjoyed some of the lowest mortgage rates we’ve ever seen. One thing that could cool the market is mortgage rates. Historically, low mortgage rates help to drive high demands for homes all over the Phoenix Area. If you’re looking to finance a new home, higher rates could cause you some problems such as higher monthly payments – costing you thousands of dollars more in interest over the years.
Over the last few years, mortgage rates have remained low because they follow the yields on the ten-year Treasury notes. With the political uncertainty coupled with the impact of COVID-19, yields have hit an all-time low. It’s fair to say that mortgage rates will ultimately rise.
When choosing to rent over buying in the next two years, it’s always possible to see the demand in homes decline and the inventory increase – however rates can also increase as well.
03: Sellers control the negotiations.
One of the largest concerns for sellers is that once they sell their homes, the hyper-competitive housing market will prevent them from finding a home. No one wants to end up homeless, but you must remember that the seller has an advantage in negotiations right now. So, it’s highly recommended that you go over various buying strategies with your Realtor to get the best deal possible.
One tactic that is becoming popular with home buyers and sellers is the seller lease back . The leaseback is an agreement that allows sellers to continue living in their homes for a set amount of time after closing. In Arizona, seller leasebacks often occur for an average of two months. There are risks to the buyer for this type of agreement, but because of the competitive market, buyers are willing to take a chance.
All aspects of the seller lease-back are negotiable. Many buyers forgo collecting rent from sellers in order to gain an advantage over other offers. Just like any agreement, the circumstances and timelines must work for both parties.
Many Arizona listing agents agree that the seller lease-back (also called a post-possession agreement) allow their clients to get at least a two-months to find their next home. This can help sellers to not feel pressured by forcing them to move right away.
04: Rental living is not for everybody.
When you’re accustomed to living in your own home and suddenly find yourself renting, it can be an unpleasant experience. The freedom of having pets, changing wall colors, or hanging shelves can become quite restrictive when renting. And although you won’t have the responsibility to fix broken water heaters or air conditioners, you must rely on your landlord to provide those repairs for you in a timely manner.
When you sign a rental-agreement, you lose control over your housing situation. Signing a year-long lease prohibits you from leaving early when the market cools down and home buyers gain the advantage. Even worse, you’re at the mercy of the landlord when they decide to sell the property or provide you with notice to move.
There are dozens of reasons why renting may not be for you, so be sure to check out other options like moving in with other family members or friends until the market cools down.
Whether homeowners decide to rent or quickly buy again, the time to sell is now. No one knows about what the housing market has in store for us. The experts have proven to be wrong time after time.
If you decide to continue down the path of home ownership, remember not to be discouraged by today’s competitive housing market. Everyone, to some degree, is experiencing the same thing. Don’t let multiple rejected offers get you down. There’s a house out there for you and if you stay persistent, you’ll be the lucky one who finds a great home before it becomes more expensive.
Did you find this article to be an interesting read? Please remember to share it on your favorite social media channel today!
Have you been thinking about BUYING or SELLING a home in the Phoenix AZ Area? I’d love to have an opportunity to sit down and speak with you about how I can provide you with everything you need to make a stress-free transition into your new home.
Let’s get started today! I can’t wait to meet you.
About the Author: The above article, Should I Sell My House and Rent Until the Market Cools Down? was written by Troy J. Elston, a licensed Realtor at West USA Realty, the premiere real estate brokerage based in Peoria Arizona. With years of experience in the real estate industry, Troy produces stunning results for home buyers and sellers. If you’re thinking of BUYING or SELLING a home in the Phoenix Area, Troy would love to share his knowledge and expertise with you.