When is the Right Time to Buy or Sell a House
When is the right time to buy or sell a house? Is now a good time to buy? Is now a good time to sell? As a financial planner, I am often asked these types of questions.
There is no definitive yes or no answer. However, I consider three factors to help clients determine the best answer for their situation.
- Your Financial Situation
- Your Goals, Objectives, Timeframes
- The Market
Let’s take a look at each one in more detail.
Your Financial Situation
Buying a home is a large purchase and, therefore, a big decision. Understanding your financial situation and what you can afford when buying or selling your home is essential.
Your financial situation will relate to things such as:
- Income
- Expenses
- Tax Situation or Tax Ramifications (if selling)
I recently had a friend who was looking to sell his home. When we looked at it, the market had gone up so much that it pushed him past the tax exclusion on capital gains. This means he will have to pay capital gains taxes if he decides to sell now.
Understanding the tax ramifications, your income and expenses, and the predictability of those sources is vital. Buying or selling a home may affect your ability to save for retirement, kids’ college, etc. You should understand what those impacts may be in the short and long term.
Good planning means preparing for all scenarios. As you think through this, consider the following:
- What if something goes wrong (or right)?
- What if you are laid off or lose your income source?
- What happens if you become sick, disabled, or unable to work?
Understanding your financial situation is always step one when making major financial decisions, such as whether to buy or sell a home.
Your Goals, Objectives, and Timeframes
Step two is to examine your goals, objectives, and timeframes. Take a high-level look at where you see yourself five, ten, 15, or 20 years from now.
- Will a home purchase get you closer to those goals?
- Is it just a step along the way?
- Will this home be your final destination?
- How does this home purchase rank in your overall priorities?
If you want to start a business that may require financial risk, having a larger house payment may impact your ability to do so. A larger house payment might also impact your ability to retire when you want to.
The inverse is also true. Some clients are selling to downsize and own their homes debt-free. They may now be able to retire sooner, travel more in retirement, etc.
What are you trying to accomplish? Rank your goals. If you buy or sell a home, will it impact those goals, objectives, and timeframes positively or negatively?
The Market
I don’t think the market comes into play too much, but you should always be cognizant of where you are and what’s happening in the overall market.
We are talking about the real estate market, which is very localized. For example, I’m in Winter Garden, FL, and our market has been very strong for the past few years. Historically, Florida, as a whole, has had a very strong real estate market for the past 20 to 25 years.
This doesn’t guarantee an up-market all the time. There is always risk in any financial decision, including real estate. The Fed recently lowered interest rates and said it plans to lower them again before the end of this year and into next. Those decisions are data-dependent, so there is no guarantee that they will continue to make adjustments.
Yes, we want to pay attention to the market and how things are going, but that’s not the most important thing when deciding whether it’s the perfect time to buy or sell a home. You’re unlikely ever to have absolutely perfect timing.
What Matters Most
The most important things to consider are your financial situation and what you are trying to accomplish in the big picture. Outside of looking to buy or sell a house, what do you want to achieve? What are you working toward?
No crystal ball can predict the perfect time to buy or sell a house. However, answering these questions can help you reach what I call “the better time.”
We can meet virtually or in person if you live in the Central Florida area. Please email me at kyle.newell@newellwm.com, call/text at 407.337.7128, or schedule a meeting at Schedule – Newell Wealth Management (newellwm.com)
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