Your house is listed with a good Realtor, the "for sale sign" is on your carefully manicured lawn, and inside you've followed all the staging tips that real estate experts recommend.
In short, you are all set to sell your house, and then you hear that home price increases have slowed down. What do you do now?
You have a number of options, ranging from doing nothing to panicking. The middle ground includes re-evaluating your list price, coming up with deal sweeteners, or taking a softer stance in price negotiations.
The truth is that while you should do something, the important thing is not to overreact to the slowdown in home prices.
The Rally in Home Prices - Has It Stalled?
Some headlines have expressed concern that the rally in housing prices may be stalling. To look at the numbers on the surface, the concern seems understandable. According to the S&P/Case-Shiller Home Price Indices, the year-over-year gain in prices nationally has slowed from over 10 percent at year-end, to 6.24 percent as of June. If home prices are slowing that rapidly, isn't it only a matter of time before they go flat?
Not necessarily. Here are two things to consider about the recent price trend:
- The softness in home price gains is old news. The year-over-year numbers look weak now because the fourth quarter of last year and the first quarter of this one were slow. However, home prices gained 3.11 percent in the second quarter, the best quarter in a year and a pace which, if continued, would eventually put year-over-year gains back above double-digits. In other words, it seems as though the housing rally is regaining momentum after a short pause.
- Expectations should be moderated. Ultimately, year-over-year gains in the 6 percent range should not be seen as a sign of weakness. Some double-digit gains while bouncing back from a prolonged slump were to be expected, but too much too soon would just perpetuate the type of boom-and-bust cycle the housing market has seen enough of over the past decade. In the long run, moderate, mid-single-digit price gains might be more sustainable, and healthier for the housing market.
What Should You Do Now?
In the past decade, the housing market has seen a frantic boom, a devastating collapse, and a sharp bounce back. Now, if price gains are slowing, perhaps the market is finally entering a slow-and-steady phase.
The restoration of sanity to the housing market calls for common sense responses rather than any sort of panic move. Here are some suggestions if you are concerned that a softening trend in home prices may affect your ability to sell your home:
- Take a careful look at neighborhood conditions. National trends are just a broad indication of trends; when pricing an individual property, it is very important to take into account local conditions. Note not only what comparable properties are selling for, but how long they are staying on the market.
- Don't set a price as a negotiating stance. When the housing market is rising, sellers often price aggressively, assuming that sooner or later the market will rise to meet their price. Unless you are in a region where real estate is particularly hot, this may be an overly confident strategy in the current environment. The housing market is recovering, but it certainly isn't back to the frenzy of the housing boom. Setting the bar too high may simply scare away suitable buyers before they even look at your property.
- Closely monitor mortgage rates. A big thing you have going for you is that mortgage rates have remained low. According to mortgage finance company Freddie Mac, 30-year fixed mortgage rates ended August at 4.10 percent. Sure, you're a seller not a buyer, but you still have a stake in low mortgage rates. Those low rates have helped support the rally in housing, and if you see mortgage rates start to rise, you may have to be more accommodating about your pricing strategy.
The housing rally may have slowed, but it has not stalled. In fact, this might be a good time to sell. Prices are higher but not back to peak levels, and mortgage rates remain low, so the cost of buying is reasonable. An improving job market means there is a bigger pool of potential buyers out there who can afford that cost. All in all, slower price gains mean it's less of a crazy market, and that calls for sensible home-selling strategies rather than extreme measures.