The housing market has its ups and downs but lately it seems that the price of homes only has one direction: Up. This may sound like a good thing, and it is, but many professionals fear that this continuous rise in the price of housing is coming to an end. Over time the price of homes will certainly increase, but the trouble is that the market goes up and down along the way. If you get caught needing to sell your home during a dip in the market, then you could potentially lose hundreds of thousands in equity. So, how do you know when is the right time to sell?
The housing market is cyclical – historically, the price of homes rises and falls in a not so drastic five-year cycle. However, in 2008 the housing market took a dramatic dive due to a vast over extension and overvaluation in the value of homes. For some areas, this unprecedented crash in the housing market took almost a decade to recover from. The market hasn’t corrected again since that recession, so experts are having trouble pinpointing when the next dip in the price of homes will be.
That brings us to now. Industry professionals are beginning to look to 2020 or 2021 to be the start of the next recession. Although no one sees any signs of another catastrophe like the Great Recession, they do see indications in the economy that point to the coming years hurting the housing market. Instability in the stock market, political uncertainty, and a decline in consumer confidence are just a few of the critical signs pointing to a recession on the horizon. The value of homes is linked to the health of the economy, simple supply and demand dictates that if people can’t afford to buy homes then the price of housing will drop.
So, what does this mean for homeowners? If you don’t see a move in the near future and intend to stay put for at least a decade, your investment will be secure. However, selling when the market is at its peak could give you several options for growing true wealth. When the market is at or near its peak, the equity that you have in your home can be used to purchase a duplex, triplex, or several properties to rent. Rental properties generate passive income that can pay for your mortgage, even in a recession. If you wait too long and a recession settles in, the amount of leverage you have from the equity in your home will shrink, making the purchase of a rental property very difficult.
Another way to take advantage of the housing market right now is to sell high and rent for a while until the market takes a dip. If you intend to sell in the next 5-7 years, now might be the best time to get out of the housing market and use your equity to buy again when the time is right. This strategy works great for people with predictable changes in their housing needs, such as an upcoming retirement or a desire to downsize because the kids have left the house. In this situation the money you gain from selling while the market is strong will vastly outweigh the money you spend on rent for a couple of years.
The equity you have in your home doesn’t even have to be used to buy a new home; it can be used for any investment like starting your own business. You can even sell your home and not have to move. Clever homeowners who are trying to get the most out of their home before the next recession can sell to an all-cash buyer and simply rent the home back.
We are Gulf State Homebuyers and we purchase homes in the areas of Houston and Baytown, Texas. We buy homes in all conditions and at a very competitive price. By selling to us, you can skip all the cost and hassle associated with putting your home for sale on the open market. Plus, you can sell fast before the economy starts to slide. We can even rent your house back to you until the time is right to buy again. Now is a great time to sell and put the equity you have built in your home towards your next big investment. Contact us today for your free, no obligation appraisal.