These are crazy times we are living in. First and foremost, we need to be concerned about our families, friends, and communities to do all we can to protect each other from the dangers of the coronavirus. Everyone’s health and safety are paramount in any decision we make. Though with the coronavirus hanging over the country and our world there are many families who will have to make tough decisions about selling a home. If you are in the market to sell I urge you to get in touch with a trusted and knowledgeable Realtor who can help you navigate the current circumstances.
Right now, people are in a panic/fear mode. Stock portfolios are falling, grocery stores are low on food and our medical system is strained. The pandemic has touched the real estate market as well. Home showings are down, contract cancellations are up, sellers are hesitant to list their homes and buyers are in a “wait and see” mindset. All these things point to a slowdown for at least the near term if not longer. As whole cities shut down and industries grind to a halt the US economy is almost certain to fall into a recession. This will hurt home values. Interestingly, in 3 of the past 5 US recessions home values have gone up. Though when values did rise they were modest so values were affected. See chart below:
What’s important is how you prepare and plan for what to do during a recession. None of us have a crystal ball to predict the future so its necessary for each family to do what’s best for them and make a smart decision in tough times. Let’s take a look at different strategies for sellers and discuss them.
Sellers – List Now or List Later
If you are considering placing your home on the market there are 2 main strategies as we enter a market slowdown. The first strategy is to list right away, price aggressively and get the home sold before home values to continue to deteriorate. Even with interest rates lower than normal, buyers will be picky about homes and target ones valued correctly. Pricing will be paramount in the near future. Making your home stand out and marketed well will always be important. But the value will be an even stronger concern if we enter a recession. Pricing your home to move will create interest from buyers immediately. Some sellers will say they don’t want to “give their house away” or take less than what it is worth. The counter to that though is selling now will save you money in the long run rather than selling later if you predict a recession will carry forward with home value losses. For example, as prices deteriorated after the great recession in 2007-2008 a seller would have done better to have listed and sold their home at an “aggressive price” in 2008 versus waiting for the market to change and sold in 2010 when values had continues to drop.
According to NEFAR statistics, the average sales price for single-family homes in 2008 was $221,395. The average sales price for a single-family home in 2010 was $166,400. Even if you had priced your average home below market value at $200,000 in 2008 you still would have come out tremendously ahead versus waiting until 2010.
The 2nd strategy is the wait and see approach. Sellers taking this approach tend to have a much rosier view of the direction of the economy and home values. If you believe that the downturn will be short-lived and the market can have a quick turnaround then your strategy may be to wait and see how the market goes. The benefits of this strategy are you don’t price your home aggressively now and leave money on the table. If you feel that prices will come up soon then why sell now if when the market is down. The downside to this strategy is your patience may not pay off. If values continue to deteriorate you may leave yourself in a worse position than if you have taken action earlier.
Each family’s situation and mindset are different. Your personal circumstances may dictate one path or another when selling your home. So please reach out to a conscientious Realtor who can help guide you through a successful home sale.
Ethan Gregory has been a licensed Realtor since 2004 averaging 40+ sales a year and consistently ranked in the top 10% of Realtors in Northeast Florida.