Sell Now or Wait For Prices To Recover?

If you can’t decide whether to put your house on market, you’re probably confronting two options: (1) Hold onto your property and wait for the market to recover or (2) Sell now, take the loss and move on.

Here are a few thoughts. Let’s say you purchased your property four years ago for $1.75 million.  In today’s market, the appraiser puts the value at about $1.4 million…a 20% loss. How long will it be before the market recovers enough to recapture that loss?  Consider this:  If prices begin rising now and increase 5% annually, it would take approximately four years for your property to recover its original purchase price. There is also another factor to consider, commonly referred to as the “cost of waiting”. If you decide to wait out the market, the portion of your monthly housing expenses (mortgage, taxes, insurance, maintenance, utilities, and fuel) that you would save by selling now and moving into a less expensive home should be factored into your decision to wait for the market to recover.  You will always have housing expenses, but the difference between the housing expenses in your current home and those of a prospective (and less costly) home is the amount you will lose as you wait for the market to recover. Depending on the amount of monthly costs you will save by selling now and moving into less expensive accommodations, the time it will take for you to recover your original purchase price, plus the loss of monthly cost savings, could drive the  recovery time to possibly 6-8 years.  An additional factor is that the market may not deliver steady price appreciation. Obviously, any further market decline would influence both of the key decision factors.

There is no reliable predictor of real estate market timing. Some local realtors project a price turnaround late this year and into next year. Some feel that the higher end market will take longer to recover. But no one…even the optimists…are predicting a dramatic turn around in prices. However, as always, when the lower end of the market sells, it creates opportunity to “buy up”, which ultimately supports the higher end of the market.

It is a rare individual who is immune to the difficulty of accepting the realities of today’s market. (On average, most individuals have lost 25-30% in real estate, stocks or both.)  The Sell/Hold decision entails weighing a perplexing mix of factual and attitudinal factors, such as real state market conditions, overall economic conditions, personal financial realities, stubbornness, conflicting advice and reluctance to accept a loss. Welcome to your very own real estate reality show.