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Dec
03

Advice on Buying and Selling Homes as Prices are Rising

According to the S&P/Case-Schiller index, home prices have seen the biggest percentage gain in over two years. Mortgage rates and foreclosures have hit a record low and the job market is improving: these are great signs for our economy, but what do rising real estate prices mean for those who are in the market? Whether you’re trying to buy or sell, there are important things to consider.

Advice for buyers

We are probably as close to hitting bottom as anyone can truly predict, so chances are the longer you wait to buy, the higher the price you will have to pay. Also, good inventory is low right now – the longer you wait, the greater the chance you will be in a bidding war with other buyers. Mortgage rates are incredibly low right now too, so if you are qualified to buy there is no reason to wait. Although, historically, mortgage rates tend to affect prices rather than the other way around, as available real estate goes down and demand goes up it’s likely that mortgage rates will rise too. Also, deals can often be structured in such a way so that a portion of the buyer’s closing costs can be covered by the seller, leaving the buyer more disposable cash to pay for some immediate improvements on a home that they may want to make. In addition, all-cash buyers still have a brief window of opportunity to save even more: there is 3.8% real estate tax that kicks in as of January 1, so sellers may be willing to offer a deal to a buyer who can close in December in order to avoid this tax. As home prices continue to increase and mortgages do too, one way to save money is by buying sooner rather than later – a house you can afford today may soon be out of reach.

Advice for sellers

Buyers are out there buying right now – but stale, overpriced properties are still sitting. Sellers who recognize that they need to be realistic about pricing their homes are the ones who will successfully sell – and get the highest prices. Those who refuse to price their property correctly when first listing will ultimately have to sell for less than they could have gotten if they had priced their homes right in the first place. It’s the low mortgage rates and small amount of “attractive” inventory that is causing the increase in real estate prices – so it’s crucial to remember that it’s the realistically priced homes that are selling and attaining the increased prices. Also, it’s worth noting that there is a new real estate tax that takes effect January 1: sellers in higher income brackets will have to pay an additional 3.8% tax on the amount of money gained on the sale for gains over a specific threshold.

In the future, prices most likely will continue to rise – but at a slow, steady rate. It’s unlikely they will get back to the prices they were at the height of the market. If you’re buying, do it while mortgage rates and prices are still low; if you’re selling, remember that it is as important as ever to price your real estate correctly the first time around.