Should I Sell My Home Now or Keep Riding The Appreciation Wave?

According to an article by real estate entrepreneur and Harvard Extension School Instructor, Teo Nicolais:

The answer is Maybe.

Below are some excerpts from the article:

“The next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.” — Fred E. Foldvary (1997)

Foldvary’s prediction was right on and was based on the predictable cycle in real estate.

When I take a closer look at our market here in Portland as it pertains to this cycle we have finished recovering and have entered the expansion stage.

More from the article:

The transition from recovery to expansion occurs when companies and individuals have bought up or rented most of the available buildings. Occupancy begins to exceed the long-term average. As unoccupied buildings become scarce, landowners raise rents.

Since most real estate expenses are fixed, increased revenues translate almost dollar-for-dollar into increased profits. Increased profits attract new development of vacant land or redevelopment of existing properties.

Basic economics tells us that new supply will satisfy demand and eliminate the upward pressure on rents and land prices accordingly. But here’s the twist: it takes a long time to add new inventory to the real estate market once it’s needed.

Market studies must be undertaken. Land sales must be negotiated. Zoning and permitting must be obtained. Financing for the project must be found (no easy feat coming out of a recession). Only then does new construction begin. And the construction itself takes a long time (two to five years for the average development).

By the time meaningful amounts of inventory start to come online, the overall economic expansion has been under way—without the benefit of new supply—for five to seven years. During all of that time, occupancy rates and rents have been increasing.

In fact, the cycle reaches a point at which rents are not simply going up—they are going up faster and faster (rent growth is accelerating). Investors build this trend into their forecasts. And we reach that critical point in the real estate cycle where, as William Newman documented as far back as 1935, the price of land begins to reflect not the existing market conditions but rather the anticipated rent growth to come.

Investors, believing the price is justified by the future growth, overpay for the land relative to the current market, and start building for a future market. The boom is officially on.

Perhaps the most stunning aspect of the real estate cycle is not its inevitability but rather its regularity. Economist Homer Hoyt, through a detailed study of the Chicago and broader US real estate markets, found that the real estate cycle has run its course according to a steady 18-year rhythm since 1800.

Those who lived through the financial crisis of 2008 will (we hope) always be weary of the next major crash. If George, Harrison, and Foldvary are right, however, that won’t happen until after the next peak in 2024.

Between now and then, aside from the occasional slow down, the real estate industry is likely to enjoy a long period of expansion.

Okay fine.  Let’s assume Nicolais is right and we apply some good old math to the question.

Example 1:

Your home is worth $400,000. and you want to move up to a $500,000. home.  All things equal at a 7% per year increase in appreciation your home goes up $28,000 in the next 12 months BUT the home you had your eyes on went up $35,000. SO you’re actually $7,000 worse off for waiting.

Example 2:

If you are instead, down sizing to a $300,000. home, you would benefit by $7,000. applying the same math. Your home rises the $28,000. BUT the home you want only goes up $21,000. SO waiting pays.

Now, if you wait too long and prices are falling then the opposite would hold true.

So the answer to whether or not you should sell now or wait is:

It Depends.

Not just on the math but also on the motivation that is supporting the move.  As well as the compelling reasons that exist for moving in the first place.

The Good News?

If you’re on the fence about moving and really just need more information from a true professional…I’ve got you covered.

Even better, if you know you’re going to make a move in the near future, want to get the maximum amount of money in your pocket at closing and want a smooth transaction handled by a professional who’s been doing just that since 1977…I’ve got you covered!

If you’re in my service area and meet my criteria that is.

I specialize in maximizing sellers proceeds in the following area’s:

  • Happy Valley
  • Clackamas
  • Milwaukie
  • Sellwood
  • Gresham
  • Damascus
  • Boring

My criteria is straight forward.

Who I am a good fit for:

  • Sellers who are motivated to sell for top dollar.
  • Positive minded people.
  • People who demand great communication from the professionals that represent them.
  • People who demand to work with a real estate pro that knows the market better than they do and is a step ahead of the competition too.
  • Sellers that want to work directly with the Broker they hire and not always be shuffled off to a less qualified team member.

Who I’m not a good fit for:

  • Unmotivated sellers who don’t care whether they sell or not.
  • People who feel the need to give me advice on how to do my job.
  • Negative Nellies.

I’ve been fortunate to have served more than 1500 happy seller clients in these area’s over the years and I would consider it a privilege to someday be of service to you as well.

Call at your convenience, 503-913-8218 and I’m happy to start guiding you immediately with zero obligation on your part.

If you’d rather email me do so here:

mf7figureman@gmail.com

Maximizing Your Proceeds Since 1977,

Michael

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I am a three decades+ veteran of the sales/marketing industry. I struggled at first to make a living but then had the good fortune to meet my mentor, Tom. Tom was, at one time, the #1 salesperson in the nation for his product which was also my product. I simply applied what he taught me and 'Boom' my career took off like a Roman Candle! I set records, won awards and trips, had all the goodies and discovered along the way how to live a balanced and rewarding life. After 3 decades of selling/coaching/training I now dedicate ALL of my time to helping others learn strategies that will get them where they decide to go. If you'd like a FREE Strategy Session go to: www.thesalessyndicate.com and fill out the request form.

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