ELMS ON HOMEBUYING:
SHOULD YOU SELL?

With homes selling for all-time high prices, the majority getting multiple offers, & average offers above asking price, now is an excellent time to SELL your home. But it's terrible time to buy. #realestate 1/

Here's how I break down possible scenarios.

(1) You hate #homeownership & want to go back to renting. If you can find comfortable rental housing for less than your current mortgage, insurance, property taxes, & HOA fees, do it. Don't try to recover sunk costs in the home. 2/

(2) You're nearing #end-of-life & can no longer manage house maintenance, or you want/need assisted living. There's no benefit to waiting. If you can cash out enough from the sale of your home to buy into a retirement or care facility & cover some years of expenses, do it now. 3/

(3) You want to change your housing but remain a #homeowner. This means selling AND buying. You'll only benefit if you can defer the purchase step until home prices fall by 2 sets of closing costs, PLUS 2 moves, PLUS 25%+ of the price you sold for. This may be years out. 4/

Scenario (3) gains merit if you need to move anyway for other reasons. 5/

Scenario (3) loses merit if your only objective is to harvest windfall profits from the current housing boom. There are costs ("frictions") imposed by the many market players who want a piece of the action. You need to take steps to reduce these costs for this move to pay off. 6/

Cost reductions could come from reduced sales commissions. For example, sell to a buyer who does not have an agent. That will boost your profit on the sale by ~2-3%. Or sell FSBO to a buyer WITH an agent, same thing. (Make sure a competent agent is involved somewhere tho.) 7/

On the purchase side, cut costs by aggressively researching lenders & checking out their fees, not just their interest rates. Local credit unions may offer low closing costs to members. 8/

Finally, there are opportunity costs to renting for some years before buying at a lower price. That's time you will NOT be accruing equity in a home, but instead fully expensing your housing costs as rent. Rent is a sunk cost; you won't recoup it on a Scenario (3) transaction. 9/

In addition, future mortgage interest rates are unknown. The trend over the past 30 years has been significantly downward, but fluctuations along the way have been nontrivial. You may pay more for a loan on the new house than you paid on the old, & this can cost $100,000s. 10/

These latter costs could wipe out any gains on your sale. There's an element of luck. If your timing is good & circumstances don't force your hand, it really is possible to time the housing market to a degree because the market is NOT efficient (in the economic sense). But! 11/

Buying & selling an existing home doesn't return much more than the rate of inflation on average. Robert Shiller of Case-Shiller Home Price Index fame has data on this going back to the 1800s. Trying to beat the odds by timing the market TWICE isn't recommended. 12/end

Would you like to see more threads on buying a home? Check out this thread of threads: https://twitter.com/jteelms/status/1380689250018942978