MW 'It's a momentous moment': I'm selling my house. With the Fed poised to finally cut interest rates, is this the perfect time?
By Quentin Fottrell
'I had three offers over 11 months, one more frustrating than the next'
Dear Quentin,
I put my house on the market in October 2023. Yes, almost a year ago. I'm single, 48, and work in finance. I earn a six-figure salary, and I decided to leave the city I live in after more than a decade. I love my house: natural-wood floors, high ceilings. And yet I've had very few bites.
It's still on the market. I had three offers over 11 months, one more frustrating than the next. The first people were retirees who turned out to be bidding on two properties. They bid $675,000, even though it was on the market for $699,000, reduced from $740,000.
The second bid was $690,000, but the young woman was intending to get a gift from her parents and they decided against it due to tax complications. And the final bid, from a single man, started at $576,000, way too low, and went up to $650,000 over a period of six months.
Now that the Federal Reserve is expected to finally cut the benchmark interest rate at its upcoming meeting, I am wondering whether the time has come to finally sell my house for a decent price. It's a momentous moment. Interest rates are finally declining.
Is this the perfect time?
Sitting on the Sidelines
Related: 'I don't want to be unfair': My mother gave me $150,000 to buy a house. One sibling wants 15% ownership. What now?
Dear Sitting,
What price freedom? That's a question only you can answer.
It's a good time to sell and it's a bad time. It's a good time to buy and it's a bad time. That is the complex, contradictory and mercurial nature of the real-estate business. Agents have got to stay in business, after all. At any moment in time, there are reasons you should wait. But the question is unanswerable in some ways. If you don't need or want to sell now, your property value will likely go up, absent another recession.
If you ask a real-estate agent, chances are they'll tell you that it's a good time to sell because inventory is low and buyers are vying for fewer properties. If you're a buyer, they may tell you that it's a good time to purchase property, because prices are under pressure due to interest rates, and if you have cash there are opportunities to be had. Hence the fluctuation in bids for your property.
For buyers, a 75-basis-point or 100-basis-point difference is typically enough to shift enough people's mindsets to increase demand - assuming rates are not astronomical - and for a seller it really only makes sense if you're downsizing and buying with cash or moving to a lower rate yourself. It obviously would not make sense to move from, say, a 2.5% 30-year rate in 2021 to a 6% rate today.
The 30-year fixed-rate mortgage rate averaged 6.2% as of Sept. 12, according to Freddie Mac (FMCC). Many economists say the magic number is 6%. No, wait, the magic number is 5%. It all depends on who you ask. Everyone has an opinion and many people have an agenda. Whether a real-estate agent is buying or selling a property, they will point out the reasons you should act now.
As you suggest, the Federal Reserve last hiked its key federal funds rate in July 2023 to a range of 5.25% to 5.5%. It's finally due to lower them again - by 25 basis points or 50 basis points, according to most predictions - on Wednesday at 2 p.m. EST. A decreasing interest-rate environment will, eventually, help change the landscape for stocks and, hopefully, real estate.
Related: 'He has never paid rent or utilities:' Do I have the legal and moral authority to charge my brother rent to live in our family home?
Issues impacting sellers
"Even ahead of any rate adjustment by the Fed, mortgage rates have moved and that's likely to spur more housing activity, with rates almost two full percentage points lower than where they were in the past few months," says Stephen Adamo, president, residential and consumer lending at OceanFirst Bank. "But sellers should be aware that many other factors - from the school year to seasonality, insurance rates, amenities and work commute - affect individual buying decisions."
You don't say why you're selling, but you're right that the Fed's rate cuts will be a game changer - eventually, if perhaps not right away. It will take time for any Fed rate cut to trickle into the market. Certainly, the news will be momentous and millions of people have been waiting for inflation to slow to a level where it's safe to once again take a dovish rate stance.
Buying and selling real estate is probably among the most emotional and important decisions most people make in their lifetime. Whether it's a good time for you to sell depends entirely on why you are selling. Did you find a job in another state? Do you want to move closer to your family? Is your current property too expensive to maintain? If so, every extra month you spend there will add up.
There is no perfect time. It's nearly impossible to call the peak of the market in real estate, because sooner or later there will be a recession or skyrocketing interest rates or a series of Fed rate cuts. Unless you have a crystal ball, you will have a hard time balancing the macro (what's happening in the world) with the micro (what's happening in your life).
The good news: More homeowners are taking the plunge and deciding to refinance. In the first week of September, refinancing activity increased by 106% year-on-year according to the Mortgage Bankers Association, while Fannie Mae's (FNMA) refinance index rose by 115% from a year ago. Keep in mind: The market has been a lot quieter since that post-pandemic real-estate rush to the suburbs, so there's a lot of catching up to do.
However, Jeff Taylor, founder and managing director of Mphasis Digital Risk, which provides risk, compliance and transaction services for the mortgage industry, suspects many financial institutions have already factored in Fed rate cuts. "It's questionable whether mortgage rates go even lower after any of the next Fed meetings," he said.
"If you're looking to sell a home in September, today's significantly lower mortgage rates will likely drive more buyer demand," he added. "And if you're a September seller who's also buying a new home, you'll benefit from today's significantly lower rates on your new purchase." ("Significantly" - given the slow, stubborn decline in interest rates - is an often subjective and entirely relative term.)
Each buyer comes with their own price point and their own story: the downsizing retirees who are paying cash and bidding on two properties at the same time, the rich kid who has no money of her own but falls in love with every property she sees, and the single man with the aggressive agent who starts low and wears you down over time in order to get his foot on the property ladder. You too only need to focus on your story - the price which you won't go below - and the reasons and rewards of selling.
More columns from Quentin Fottrell:
'This flies in the face of my morals and ethics': My father cut my sisters out of his six-figure estate. Should I push back?
At times, the pain is unbearable': My daughter cut me out of her life. I'm conflicted - do I exclude her from my will?
'I have zero regrets': I'm 84 and estranged from my two adult sons. My 48-year-old wife will get my seven-figure estate. Is that selfish?
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-Quentin Fottrell
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September 18, 2024 08:33 ET (12:33 GMT)
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