Home Prices Are Rising Slowly – What This Means For Investors/Sellers

Buyers have been hearing that interest rates are low for months, but what about sellers and investors? For your part, you should know that home prices are also on the rise. Read on below to learn just how much home prices are increasing and what that means for you going forward. Armed with this knowledge, you should have a much better idea of whether or not it makes sense to put your home on the market right now and what to expect if you decide to do so.

Home prices are on the rise across the country

To start, there’s no debating that home prices are on the rise across the country. According to a recent press release by the National Association of Realtors (NAR), nationwide, the median home price rose by a staggering 12% in the last year. It currently sits at $313,500, up from just $291,100 in the third quarter of 2019. 

However, notably, it’s not just one area of the country that seeing a significant boom. NAR notes that all four of the regions in the country saw double-digit gains in home prices this year. In fact, 65% of all of the metro areas in which the association tracks home price data saw double-digit gains on a year-over-year basis. 

Of all the metros surveyed, NAR points out that Bridgeport, Conn. (27.3%); Crestview, Fla. (27.1%); Pittsfield, Mass. (26.9%); Kingston, N.Y. (21.5%); Atlantic City, N.J. (21.5%); Boise, Idaho (20.6%); Wilmington, N.C. (20.6%); Barnstable, Mass. (19.4%); Memphis, Tenn. (19.1%); and Youngstown, Ohio (19.1%) have all seen the biggest jumps in median home price in the third quarter. 

Why do home prices keep going up?

Of course, that kind of data begs the question of why home prices are rising at such a fast pace. In this case, the increase can be attributed to two separate-but-equally-important factors. On the one hand, historically low-interest rates are driving prices up. On the other, there is a lack of inventory for interested buyers to choose from, which is driving competition for available properties.

At base, low-interest rates make housing feel more affordable to buyers. Put simply, many buyers who were priced out of the market when interest rates were high are now finding that owning a home is within their reach. Meanwhile, buyers who would have bought a more affordably-priced home a year ago are now willing to take on more debt because the monthly payment still fits within their budget.

Yet, as more buyers enter the market, there are fewer homes for them to buy now than ever. According to the same NAR press release, at the end of 2020’s third quarter, there were only 1.4 million homes on the market for sale, which is 19.2% fewer homes than were available at the same time in 2019. By extension, fewer homes for sale means that there is more competition for every available listing.

What do rising home prices mean for sellers?

If you’re a seller, you probably already know that having a competition over your listing can only be a good thing. In real estate, a bidding war typically only served to drive up the eventual sale price of a listing, which means more profit for the previous homeowners. That said, there is a catch: if your listing creates a significant amount of buzz and you accept an offer that is significantly over the list price, there is a chance that you could face a problem with an appraisal.

Remember, an appraisal is likely going to be a requirement for any buyer who is getting a mortgage. After all, the mortgage company wants to ensure that they are not paying too much for the real say that’s it. With that in mind, it can often be in your best interest to accept a cash deal, where no appraisal would be required, or to simply not count on receiving the full purchase price until you’ve received a satisfactory appraisal. 

What do rising home prices mean for investors?

As for what rising home prices mean for investors, that depends on what side of the transaction you’re going to be on. In particular, as a buyer, this will often mean that you are margins will get a little bit tighter. While many investors have the capability to make a cash offer as described above, in this case, offering cash does not necessarily mean that you have the ability to set your sale price. In this market, you will likely need to still go in competitively in order to truly help your offer stand out from the crowd.

That said, if you’re planning on selling off part of your portfolio or doing a 1031 exchange, now might be a great time to do so. like stocks, it often makes sense to buy low and sell high in real estate. With that in mind, now is the time when you will likely get the most equity out of your investment, so consider putting it on the market and cashing in on your hard-earned profits.

The bottom line 

While rising home prices are making it harder than ever for buyers to compete in the real estate market, for sellers and investors, this increase can only be linked to bigger profits. to that end, if you’ve been thinking about putting your property on the market for a while, now might be the time to make a move. 

Don’t hesitate to reach out to a qualified real estate agent, who can do a comparative market analysis and tell you exactly how much your home is worth in the current climate. once you have that knowledge in hand, you’ll have a much better idea of whether or not it makes sense to cash in on your biggest asset.