Selling Your Home? Don’t Overprice It


HiRes (6)The housing market is coming back nicely, especially here in Greater Boston. What, if anything, could slow down the current momentum? We believe it may be sellers’ over exuberance when it comes to pricing. House prices have appreciated over the last twelve months, however, with both the inventory of homes for sale and interest rates increasing, we have to be careful to not over judge what the market can bare.

Trulia just reported that asking prices have jumped dramatically and the increase is accelerating:

  • Year-Over-Year prices jumped 10.7%
  • Quarter-Over-Quarter prices jumped 4.1% (16.4% annualized)
  • Month-Over-Month prices jumped 1.5% (18% annualized)

No expert is expecting home prices to shoot up 18% in the next twelve months. If anything, price appreciation may slow as rates and inventories increase. Investors will begin to slow their purchases and first-time buyers have to stay wiithin a pre-set budget in many cases.

Buyers’ Purchasing Power

Let’s look at an example: A young couple is looking for a home and have predetermined that their budget will only allow them to spend $1,000 a month on a mortgage. At today’s mortgage rate of 4.5%, they could afford a $200,000 mortgage ($1,013 principal & interest). However, if rates jump to 5%, they would have to lower their mortgage amount to $190,000 in order to keep their monthly payment where they need it ($1,020). At 5.5%, the mortgage would need to be no more than $180,000 ($1,022).

The Impact on Prices

This decrease in buyers’ purchasing power will have an impact on home values. We do not believe it will cause a decrease in prices. However, we do believe it will likely cause current rates of appreciation to slow.

If you are thinking about selling your home, don’t get carried away with current headlines about home price increases that have taken place over the last twelve months. Realistically priced homes sell while overpriced homes just help convince buyers to purchase the realistically priced properties.

This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.