List your home when the market is hot

Q:

What is the best time of year to sell my house? I have heard that some times of the year are better than others.

A:

In the past, the general belief was that it was best to list your home near the end of spring and it would sell during the summer months. This would allow new buyers to get settled in their homes and allow enough time to get the children enrolled in new schools.

In addition to the school aspect of this plan was the reality that the spring and summer season brought with it warm days, blooming plants, green lawns and longer days. Homes looked better, pools sparkled, and we all tend to feel more optimistic and upbeat when the weather is warm. It’s a common belief that this will translate into a faster sale and a higher price.

Realtors love to drive prospective buyers into manicured neighborhoods with kids playing in yards, cars being washed in drive ways and smiling faces everywhere.

Here in Northern California the seasons aren’t that dramatic, and we are fortunate to have 300 days of sunshine. Except for a few weeks of cooler weather or rain, we have it pretty easy.

There are a few times during the year when things are slower, and they are Christmas, New Years, and Easter. This holiday slow down isn’t as significant as it used to be since many of our newer residents come from cultures where Easter and Christmas are not celebrated. For those groups, it’s an extra day off work which can be used to shop or look at homes.

The absolute best time to sell your house is when the market is hot. That happens when interest rates are low, banks are freely lending, there is little competition in the market place (translate that as low inventory) and there is sense of optimism regarding the economy.

Sounds a lot like today!

We have seen a surge of buying in the last six months that is reminiscent of what we saw during the craziness of 2004-06. During the 2004-06 bull market, we saw a lot of first time buyers using adjustable rate mortgages (ARM) to purchase homes. The ARM loans featured payments that started very low, which buyers used to qualify. With thousands of newly approved buyers coming into the market, the competition to get those buyers into homes created a buying frenzy and drove up prices. Sellers benefited greatly from the competitive bidding which in turn allowed them to be aggressive in spending this increased equity on larger homes. Unfortunately, when the adjustable rates loans reset at higher rates causing payments to increase, many of those buyers were priced out of their homes.

This time, the bull market is being fueled by the lowest interest rates we’ve seen in 30 or 40 years. Conventional buyers are able to purchase larger homes for the same or lower payments than they are currently paying and first time buyers are using FHA (Federal Housing Administration) loans which are low interest fixed rate loans. These FHA loans allow buyers to purchase with as little as 3.5 percent down and since they are fixed rate loans, there is no risk of their payments getting increased, which might cause them to lose their home.  

It’s a much healthier and safer situation than what we experienced in 2004-06.

The biggest similarity is that with so many new buyers entering the market, inventories have been dropping and multiple offers are the norm on almost every home.

There is no substitute for a hot market, and with today’s low rates and low inventories, it doesn’t look to change anytime soon. It’s a great time for sellers, but it can be challenging for buyers.