Our friends own a very attractive waterfront home they bought 20 years ago in a Florida beach community. They are now in their 80s, and they'd like to move closer to family, where they believe their retirement will be more comfortable. They could sell the property tomorrow if they priced it competitively -- still more than they paid -- but they are very reluctant to do that because the market price is much less than they are convinced their home is worth.
When the bottom fell out of the real estate market in 2008, many people thought it would recover, and prices would rise quickly. So far, that hasn't happened. Although real estate pricing is a very local phenomenon and in some communities home prices have shot back up, in most parts of the country, prices are still as much as 50 percent lower than they were at the peak.
Real estate information firm Radar Logic is releasing its quarterly report on real estate prices on Thursday. The report concludes that prices will continue to fall this year in 25 major metro markets across the U.S. Quinn Eddins, director of research at housing data firm Radar Logic, says that "Over the last year, we have seen transactions in the nondistressed market -- houses that aren't in foreclosure -- increase, but the aggregate price of those sales has declined. What that suggests is that a lot of that increase in activity is because sellers are cutting their prices to sell to people who are bargain hunting."
Eddins says he would advise sellers to wait if they can. "People who are selling now have to sell at a discount. So, if you can hold on, I wouldn't be in a big hurry to sell."
So the question becomes: If selling a property you own and moving elsewhere is part of your retirement planning, should you sell now or wait for prices to rise?
Here are some things to consider:
- Carrying costs count. If your costs will be less after the move, swallowing deep and cutting the price enough to move the home quickly may save you money in the long run because you'll shed mortgage, taxes, insurance and maintenance costs.
- Things could get worse before they get better. Earlier this year, the federal government proposed a plan to package and sell off foreclosed homes owned by Fannie Mae and Freddie Mac in $50 million packages to major investors. If this or some other housing fire sale happens, it will certainly drive down prices in the short term, says Eddins.
- Prices will eventually rise. The population is increasing, and the millennial generation -- people born between 1977 and 1998 -- are more numerous than the boomer generation. They can't live in mom's basement forever. But remember, if your home increases in value, so will the price of the replacement property you hope to buy.