How to Prepare and Sell Your House in a Down Market
Worried about the possibility of a housing crash in Northern County – San Diego, CA? Rising interest rates and high inflation have created instability in the housing market and caused home prices to fall.
In early 2023, interest rates for a 30-year fixed-rate mortgage were 6.19%, with the Federal Reserve set to keep raising rates into the rest of the year. Inflation sits at 6.5%, down from a 40-year high of 9.1% in the summer of 2022.
These economic conditions have sparked fears of a potential housing crash, as home buyers are forced out of the market and home prices continue falling. For home sellers, this means they have to lower their asking prices to attract buyers, risking losses on what’s likely their biggest assets.
So, is a housing crash inevitable? And what should you do if you’re looking to sell a home in Northern County – San Diego, or other areas of California? In this post, our team at Your Home Sold Guaranteed Realty – The Pabst Group will share four strategies to help you sell your home in a declining market. We’ll also discuss the housing market and whether we’re headed toward a crash.
What is a Housing Market Crash?
If you want to sell your home successfully, it’s important to understand what housing market crashes are.
Housing crashes are preceded by housing bubbles, which occur when the market experiences high demand and low supply. They’re also usually accompanied by low interest rates or easy borrowing conditions.
During a bubble, real estate home prices rise to unsustainable levels and become detached from the properties’ true value.
Eventually, prices rise to a point where homes are wildly overvalued and demand starts to fall, causing the bubble to burst. At this point, the market enters a natural correction to bring supply and demand back to equilibrium. Home prices start to drop, and supply begins to rise.
It’s important to note that hot markets and housing bubbles aren’t the same. Just because prices are high doesn’t mean a crash is on the horizon. Bubbles are relatively rare and are usually defined by unsustainable growth in housing prices and low mortgage rates.
Hot markets, on the other hand, are much more common. They’re influenced by local market conditions and the levels of supply and demand in that particular area.
Housing crashes may also be accompanied by a recession or other challenging economic conditions, like high inflation, because of how closely the economy and housing market influence each other. However, this isn’t always the case.
In addition, what happens in one market may or may not affect surrounding markets. Housing crashes can occur on a local, state, or national scale– like the housing market crash in 2008.
What Happened in The 2008 Housing Crash?
The most well-known example of a housing bubble bursting and causing a market crash is the one that occurred in 2008. This crash ultimately led to the Great Recession a short time afterward.
What exactly led up to the crash? The housing market had been booming throughout the early 2000s until home prices peaked in 2006 and began to decline.
In December 2008, the Case-Shiller home price index recorded the largest price drop in its history.
Borrowing conditions and credit standards were much more lax while the market was booming. But once it crashed, many homeowners suddenly found themselves unable to afford their mortgages. Others were left owning homes worth less than their mortgage (also known as a negative-equity position).
This left banks and lenders on the hook for the mortgages, which led to a rise in interest rates that many homeowners couldn’t afford. The resulting credit crisis led to many foreclosures and was a spark for the recession that followed.
Are We Headed Towards a Housing Crash in Northern County – San Diego in 2023?
The housing market has seen a period of hot activity in recent years. In 2022, home prices were even 38% higher than in 2020 at the start of the COVID-19 pandemic.
But due to rising interest rates, high inflation, and fears of a recession, home prices started falling in the latter half of 2022. This has led many homeowners to wonder if we’re headed toward a crash.
Home buyers are being pushed out of the market because of high interest rates, and even those who can afford to purchase a home may put it off until there’s less economic uncertainty.
It’s impossible to predict whether a housing crash will occur for certain. However, real estate experts seem to agree that the market is undergoing a price correction.
By late 2022, home prices had dropped by 2.4% from their peak earlier in the year. Some market experts predict that prices will continue falling into 2023, potentially by as much as ten or fifteen percent by the second or third quarter of the year.
According to Goldman Sachs, average home prices will fall six percent from their peak before reaching a plateau for the rest of 2023. However, certain markets in larger cities may experience steeper drops.
Overall, high interest rates may lead to lower housing prices or an overall plateau in prices, but this doesn’t mean there will be a sharp crash like the one in 2008. In addition, home buyers are more creditworthy and lenders have stricter lending requirements, which makes mortgages much more stable.
What Role Do iBuyers Play in the Housing Market?
During a housing crash, many home sellers may be tempted to turn to iBuyers to sell their properties.
iBuyers are companies that buy homes as-is, directly from home sellers. The seller does not need to fix the home, list and market it, or work with a realtor.
iBuyer companies use an algorithm to determine what to pay for the home. They’re usually able to give the home seller a cash offer in as little as 24 hours. From that point, the home can be officially sold in just a few days.
Then, iBuyers typically make their profit by fixing up or upgrading the homes and selling them for a larger profit.
iBuyers are relatively new, but they have the power to shape local housing markets. They sell these flipped homes for prices that ordinary home sellers struggle to compete with, which can affect overall prices in the area.
In addition, while they’re convenient, the main trade-off is that home sellers ultimately get less profit than they otherwise would have with a realtor.
Ultimately, it’s best to get a realtor’s opinion about the potential effects of iBuyers on your local housing market. An experienced professional can help you decide when and how to sell your home in a way that best meets your needs and still gets you top dollar.
4 Tips to Prepare For Selling a House During a Housing Crash
Price Your Home Right
During a down market or potential housing crash in Northern County – San Diego, it’s more important than ever to price your home accurately.
Rising interest rates mean you’ll have to price your home lower to compensate for the increased mortgage cost. That way, you still have the best chance of attracting interested home buyers who can afford your home.
There’s a fine line between pricing your home low enough that you don’t scare away home buyers, but high enough that you don’t miss out on potential profits.
The best way to price your home in a potential housing market is by working with a realtor who has in-depth knowledge of the local area.
A realtor has specialized knowledge of the pattern of home prices in the area and can help you develop an individualized pricing strategy for your property in a way that iBuyers and other algorithmic methods can’t.
Make Your Home Move-In Ready
An important aspect of selling a home during a down market is making sure the property is move-in ready.
Home buyers are often willing to pay a little extra for a home if they don’t have to renovate or repair it. This is especially the case during a recession or other tough economic conditions.
You’ll be able to justify a slightly higher asking price for your home if you take care of necessary repairs and invest in some upgrades.
- Getting a pre-inspection
- Making necessary repairs
- Hiring a professional cleaning service
- Adding a new roof or floors
- Updating curb appeal
- Ensuring that furniture, decor, and colors are as neutral as possible
A realtor can also point out other specific things to make your home stand out from other properties on the market.
Get Your Timing Right
It goes without saying that selling a house during a housing crash can be challenging. For this reason, it may be better to wait if you can afford to do so.
But if you can’t avoid selling a home in Northern County – San Diego, make sure to choose the right time frame to sell your home. For example, homes listed in the spring or summer tend to sell faster than homes listed during the winter.
Be sure to consult with an experienced realtor to help determine when to list your home on the market. An agent can also help you decide how long to wait before housing prices in the area fall even lower.
Decide if You Also Need to Buy During a Housing Crash in Northern County – San Diego
A home is an investment like any other– if you want the most profit, your goal should be to buy low and sell high.
So if you sell your home at a lower price during a recession, this means you can use the profit to buy your next one. If you can afford to, buying a home with cash and avoiding lenders can be a good option to avoid high interest rates.
But if you need a mortgage, be sure to explore all your mortgage options to make sure you wind up with a good deal. Another option is to rent a property until interest rates decrease.
We Can Help You Sell Despite a Potential Housing Crash in Northern County – San Diego
If you’re selling a house during a recession, you’ll need a local solution. At Your Home Sold Guaranteed Realty – The Pabst Group, we recognize that the current economy has many home sellers worried.
That’s why we’re proud to offer our services and unique guarantees. These guarantees set us apart from other real estate agents in Northern County – San Diego, California.
We have specialized knowledge of the local housing market in Northern County – San Diego and surrounding communities. We’ve helped thousands of families in California sell their homes fast and for top dollar, and we know we can do the same for you.
This isn’t just an empty promise. Thanks to our Guaranteed Sale Program, we can guarantee your home will sell for a certain price and within a certain timeframe. Otherwise, The Pabst Group will purchase it ourselves.