Time to Sell Your Rental Homes

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After reading the Wall Street Journal article, The Financial Crisis Change Home Buying Forever, we came away with a different take on what can be determined from their charts: Take advantage and sell your rental homes.

It is essentially a seller’s market.  That doesn’t mean it’s the absolute best time to sell your primary residence.  Why?  Well, you’ll have a really tough time finding another home.  And if you do find a home you like, it’ll be pricey and very competitive (see our article on multiple offers).

However, if you’re lucky enough to own a one or two, it’s a great time to sell your rental home.  Here’s why.

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Current market.

The residential real estate market is one that’s certainly rebounded from the recession we saw nearly a decade ago.

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Home prices are up.

Home prices have rebounded and exceeded – in most markets – where they were prior to the housing crash.  But if you dig deeper, home prices are going up by the largest proportion for lower-priced homes.   Most rental properties fall into this category, of being a lower-priced home.

 

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Borrower Credit Scores are up.

The peak of the housing boom was 2006.  Take a look at this chart.  Credit scores were at there lowest during that time.  Today’s homebuyer now has an average credit score of 745.  There are willing and able buyers out there… they just don’t have anything to buy.

Reality of the Current Market.

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Homeownership is still incredibly low.

Now, this is an interesting chart.  In 2016 homeownership reached an all-time low.  When the housing market crashed, two things happened: 1.) Many homeowners became renters, and 2.) investors started snapping up resulting foreclosures and holding them as investment properties.

Year over year price growth is slowing.

What we’re looking at here is the percent increase in average home price, from one year to the next.  When we started recovering form the recession in 2011, you’ll notice a big jump.  Then, a small market correction in 2014, and it’s been pretty steady since then.  It’s hard to say what, if anything will cause prices to jump any higher.  Especially, with interest rates on the rise.

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Mortgage rates are rising.

As rates rise, it will become even more difficult for first-time homebuyers to secure the American dream.  However, it will have no impact on rental rates, because the rental homes are already owned on a fixed interest rate.

There are fewer first-time homebuyers.

Ask any of the top partner agents with Transactly, and they’ll tell you many of the first-time buyers they’ve worked with have put their home purchase on the sideline.  It’s not that our younger generation doesn’t want own a home.  It’s that they’re priced out of the market.

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What’s Next for the Market?

We can’t predict the future, but right now homeownership is out of reach for many first-time homebuyers.

If there’s one thing that’s inevitable in markets – as in life – it’s change.  Look at any chart.  There are peaks and valleys, upswings, and downturns.  Market corrections happen.

It’s incredibly difficult to time a market correction.  Most people, and large institutions, rarely ever get it right.  It’s one of those things we only saw coming once it’s hindsight.

One thing’s for sure, though: If you own a single family rental home, you won’t have trouble selling it.

If you’re on the fence about selling your rental home, feel free reach out to one of our partner agents for a free analysis.

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