We don’t need a crystal ball to tell us when to take the first step in determining if this is a good time to sell a home and buy another.
While market conditions should play a role in your decision, the first step starts with you, and the state of your finances.
Your Personal Finances
How’s your credit? Lenders have tightened their FICO requirements. Even FHA has raised the lower end of their acceptable FICO range.
How long have you been in your current job? Lenders want to see at least two years with the same employer, or in the same line of work and no decrease in income.
Next, do you have the cash to put down on a home? In this strong seller’s market you may be able to use the equity from your current home to fulfill the down payment requirement on your new home.
You’ll need at least 20 percent of the price of the home if you go with a conventional loan. If you obtain an FHA-backed loan, the down payment requirement has a lot to do with your FICO score.
That said, lending has become so tight that sometimes a stellar FICO score can’t make up for lower income, a spotty job record and even a huge down payment, according to news from the Wall Street Journal.
Don’t forget closing costs. These are the fees you’ll need to pay when you close on the purchase of the home. They vary, but a rule of thumb is to have 2 to 5 percent of the purchase price in cash reserves.
Timing the Market
If you’re trying to time the market so that you sell at the top, good luck. Nobody knows when a particular market will top out, until it starts its downward move.
But, there are signs in the economy you might want to watch, according to some experts, that the real estate market is changing. These signs include:
Unemployment
Housing market prognosticators keep a close eye on unemployment numbers. It’s only natural that people worry more when their jobs aren’t secure. This anxiety tends to make them hold off on spending money.
Consumer confidence typically lags right along with low employment numbers. When the jobs situation improves, so does the confidence of Americans and money begins flowing again.
Right now, unemployment is quite low. But these numbers only help us figure out part of the story.
The Housing Inventory
A “shrinking inventory” is a real estate term that describes a market in which the number of homes for sale decreases. Think of it as supply and demand.
When there are fewer homes on the market, prices tend to rise, which is a good sign if you plan on selling your home.
New Housing Starts
Homebuilders sit out tight economies. When people are back to work and spending money again builders begin new developments. While national new housing starts are important, keep an eye on the state and local trends.
While it’s wise to monitor economic indicators to help time your home sale to coincide with the top of the market, there’s also a danger in that. The only sure-fire way to know that we’ve hit the price peak of the market is when prices start falling. By then, it’s too late.
Real estate markets move in cycles and can take excruciatingly long to change, or they can transform almost overnight. The ideal time to sell a home is when prices are high and there is lots of competition from homebuyers.
That time is now.
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