Should you sell now or wait for interest rates to fall?

As ‘rate cut’ headlines begin to creep into the media, you might be wondering whether it could be a good idea to think about selling your property. If you’ve been holding off selling – and buying – due rate rises, you’re not alone. Since May 2022, there have been 13 rate rises, which hasn’t made the market particularly appealing.

In 2023, homeowners experienced a different market compared to the early years of the pandemic: while home prices have been rapidly rising, higher interest rates since 2022 have stifled demand. Yes, our house prices increased, but so did repayments on variable mortgages and end of term fixed rate mortgages too. This resulted in reduced disposable income and lower borrowing capacity, which was the perfect recipe for the slow demand and supply in the market we saw last spring.

According to CoreLogic, we’ve seen a very positive start to the year in terms of auctions and listings, showing the market could be stabilising. This stabilisation could provide an opportunity for buyers to return to the market with renewed buying power, which is great news for sellers like you looking to get a good price.

Now, selling a house is a major decision that requires careful consideration. It’s common knowledge that moving is one of the top five most stressful situations you can find yourself in over your lifetime,  so you need to either have a necessary reason to move or know you’re going to be financially better off for doing so in order to make the call.

While the future is hard to predict and there might be a myriad of other reasons you’re interested in selling, this article will explore the pros and cons of selling now to help you make up your mind.

Reasons to wait

1. A good repayment rate on your mortgage

If you have secured a low fixed mortgage rate that is yet to expire, you’ve done well! However, there may be little incentive to sell your house and move into a new one with a significantly higher interest rate. Enjoy the low interest rate you’ve locked in and continue building equity in your current home. Ben Williams, Head of Investor Relations here at Homely says, “The decision to sell really does depend on whether you are planning on buying in the same market. If you are selling purely to cash out, then it would make more sense to wait for market conditions to improve so that you can take advantage of increased buyer demand from lower interest rates.” Hang in there, add some value through renovations or take a well-deserved holiday. 

2. Affordability concerns

Affordability is a major concern for many potential homebuyers, especially with rising housing prices and higher interest rates that have not only eaten into disposable income but also reduced your borrowing power. Waiting to sell your home until the timing is right can give you the opportunity to assess your financial situation and ensure that you can afford the home you want to buy next. It’s important to consider not only the purchase price but also the monthly mortgage payments and the overall impact on your budget as well as job stability and general cost of living. Matthew Scafidi, from Abode Advocacy, offers practical advice here. “Many sellers try to sell high and buy low but few actually manage to achieve this. Remember if you are selling and buying in the same market based on a need or a lifestyle want you should do so when ready.” Keep saving while you keep your eye on the market. When rates do come down, you’ll not only feel more confident with your savings habits but you’ll have a better idea of what you actually want from your next place. 

3. Limited housing inventory

Housing inventory still remains low, and likely due to the reasons above – people are not selling. While this may make it easier for you to sell your home, finding the right replacement property could be a challenge. With fewer homes on the market, you may struggle to find the ideal location, number of bedrooms, or overall feel that meets your requirements. It’s important to keep an eye on property regardless so set up your preferred Homely Alert so you don’t miss out when your perfect home comes along. 

Reasons to Sell Now

1. Buyer interest

While the housing market may not be as hot as it was in 2021, there is still plenty of buyer interest. Properties may not be experiencing the same level of bidding wars and sky-high sale prices, however the lack of supply can mean added interest. That being said, it is important to work with your selling agent to price your home competitively and list it widely, just before the spring selling season. Pete Wargent, from Allen Wargent, says, “Traditionally in Australia the spring selling season is when most people look to list. Most prospective vendors will therefore wait until the new year. Most markets tend to be forward-looking and will anticipate interest rate cuts ahead of time, so waiting for the perfect time to sell may not be the way to go. Indeed, listing before the crowd means that you may face less competition from other vendors.”

David Webb, Head of Industry at Homely, suggests keeping an eye on sold prices of properties similar to yours to get an indication of what the market is valuing your home at. You can set up an Alert for homes like yours to make this easier. 

2. Life Changes

If you need to move for any reason, such as a job change, expanding family, or the need for a larger workspace for remote work, selling your home now may be a valid option or even non-negotiable. Life changes often require a quick transition, and selling your home can provide the necessary funds and flexibility to make your next move. However, it is essential to prepare properly and set realistic expectations to ensure a profitable sale and a successful purchase of a new home. Sometimes you just need to sell so find an agent you can trust and make sure you get the best outcome to save you precious time. 

3. Potential Market Shifts

The market is constantly evolving, and conditions can change. If mortgage interest rates shift down further or if inflation continues to decline, it could open doors for buyers to come back to the market. Additionally, if a recession occurs as predicted in the latter half of 2023, a drop in mortgage rates could further incentivise buyers. While it is challenging to predict market trends accurately, selling your home now provides an opportunity to take advantage of the current conditions rather than waiting for uncertain future developments. Matthew says, “Interest rates may fall but they also may increase as well and realistically not many people know when this will occur. You could be waiting for a very long time and wasting the most valuable commodity we all have not enough of — time.”

Conclusion

Deciding whether to sell your house now or wait until interest rates drop requires careful consideration of various factors. While low mortgage rates, affordability concerns, and limited housing inventory may make waiting an attractive option, buyer interest, life changes, and potential market shifts can provide compelling reasons to sell now. Ultimately, the decision should align with your individual circumstances and long-term goals. If you’re on the fence, chat to your local real estate agent about your options and get an obligation free appraisal. 

Remember, the real estate market is constantly changing, and it is essential to stay updated on the latest trends and developments to make the best decision for your situation. A great way to keep your finger on the pulse is to monitor sold prices on Homely and make sure you set up Alerts to be made aware of new properties that might interest you as soon as they’re listed.