Selling your home when you still need to shop for a new one can feel daunting to even the most seasoned homeowner––especially when the demand for new homes keeps rising, but the supply feels like it’s dwindling.¹ You’re not alone either if you’re already feeling drained by the complex logistics of trying to sell and buy a new home all at once.
Searching for a new home can be exciting, but many homebuyers admit that it can also be stressful, especially if you live in an unpredictable market with plenty of competitors. Unfortunately, waiting out a competitive housing market isn’t always the best idea either since listings are expected to remain limited in the most coveted neighborhoods for some time.²
That doesn’t mean, though, that you should just throw up your hands and give up on moving altogether. In fact, as a current homeowner, you could be in a better position than most to capitalize on a seller’s market and make a smooth transition from your old home to a new one.
We can help you prepare for the road ahead and answer any questions you have about the real estate market. For example, here are some of the most frequent concerns we hear from clients who are trying to buy and sell at the same time.
“WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?”
This is an understandable concern for many sellers since the competitive real estate market makes it tough to plan ahead and predict when you’ll be able to move into your next home. But chances are, you will still have plenty of options if you do sell your home quickly. It may just take some creativity and compromise.
Here are some ideas to make sure you’re in the best possible position when you decide to list your home:
Tip #1: Flex your muscles as a seller.
In a competitive market, buyers may be willing to make significant concessions in order to get the home they want. In some cases, a buyer may agree to a rent-back clause that allows the seller to continue living in the home after closing for a set period of time and negotiated fee.
This can be a great option for sellers who need to tap into their home equity for a downpayment or who aren’t logistically ready to move into their next home. However, many lenders limit the duration of a rent-back to 60 days, and there are liability issues to consider before entering into an agreement. A contract and security deposit should be in place in case of any property damage or unexpected repairs that may be needed during the rent-back period.³
Tip #2: Open your mind to short-term housing options.
While it can be a hassle to move out of your old home before you’re ready to move into your new one, it’s a common scenario. If you’re lucky enough to have family or generous friends who offer to take you in, that may be ideal. If not, you’ll need to find temporary housing. Check out furnished apartments, vacation rentals and month-to-month leases. If space is an issue, consider putting some of your furniture and possessions in storage.
You may even find that a short-term rental arrangement can offer you an opportunity to get to know your new neighborhood better—and lead to a more informed decision about your upcoming purchase.
Tip #3: Embrace the idea of selling now and buying later.
Instead of stressing about timing your home sale and purchase perfectly, consider making a plan to focus on one at a time. Selling before you’re ready to buy your next home can offer a lot of advantages.
For one, you’ll have cash on hand from the sale of your current home. This will put you in a much better position when it comes to buying your next home. From budgeting to mortgage approval to submitting a competitive offer, cash is king. And by focusing on one step at a time, you can alleviate some of the pressure and uncertainty.
“WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?”
This is one of the most common concerns that we hear from buyers who are selling a home while shopping for a new one, and it’s realistic to expect at least some overlap in mortgages. To make sure you don’t get into a situation where you are carrying dual mortgages for longer than you can afford, examine your budget and calculate the maximum number of months you can afford to pay both.⁴
If you simply can’t afford to carry both mortgages at once, then selling before you buy may be your best option. (See Tip #3 above.) But if you have some flexibility in your budget, it is possible to manage both a home sale and purchase simultaneously. Here are some steps you can take to help streamline the process:
Tip #4: As you get ready to sell, simplify.
You can condense your sales timeline if you only focus on the home renovations and tasks that matter most for selling your home quickly. For example, clean and declutter all of your common areas, refresh your outdoor paint and curb appeal, and fix any outstanding maintenance issues as quickly as possible.
But don’t drain unnecessary time and money into pricey renovations and major home projects that could quickly bog you down for an unpredictable amount of time. We can advise you on the repairs and upgrades that are worth your time and investment.
Tip #5: Prep your paperwork.
You’ll also save valuable time by filing as much paperwork as possible early in the process. For example, if you know you’ll need a mortgage to buy your next home, get pre-approved right away so that you can shorten the amount of time it takes to process your loan.
Similarly, set your home sale up for a fast and smooth transition by pulling together any relevant documentation about your current home, including appliance warranties, renovation permits, and repair records. That way, you’re ready to provide quick answers to buyers’ questions should they arise.
Tip #6: Ask us about other contingencies that can be included in your contracts.
Part of our job as agents is to negotiate on your behalf and help you win favorable terms. For example, it’s possible to add a contingency to your purchase offer that lets you cancel the contract if you haven’t sold your previous home.
This tactic could backfire, though, if you’re competing with other buyers. We can discuss the pros and cons of these types of tactics and what’s realistic given the current market dynamics.
“WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?”
When you’re in the pressure cooker of a home sale or have been shopping for a home for a while in a competitive market, it’s easy to get carried away by stress and emotions. To make sure you’re in the right headspace for your homebuying and selling journey, take the time to slow down, breathe and delegate as much as possible. In addition:
Tip #7: Relax and accept that compromise is inevitable
Rather than worry about getting every detail right with your housing search and home sale, trust that things will work out eventually––even if it doesn’t look like your Plan A or even your Plan B or Plan C. Perfecting every detail with your home decor or timing your home sale perfectly isn’t necessary for a successful home sale and compromise will almost always be necessary. Luckily, if you’ve got a good team of professionals, you can relax knowing that others have your back and are monitoring the details behind the scenes.
Tip #8: Don’t worry too much if your path is straying from convention
Remember that rules-of-thumb and home-buying trends are just that: they are estimates, not facts. So if your home search or sale isn’t going exactly like your neighbor’s, it doesn’t mean that you are doomed to fail.
It’s possible, for example, that seasonality trends may affect sales in your neighborhood. So a delayed sale in the summer or fall could affect your journey––but not necessarily. According to the National Association of Realtors, the housing market tends to be more competitive during the summer and less competitive during the winter.⁵ But it’s not a hard and fast rule, and every real estate transaction is different. That’s why it’s important to talk to a local agent about your specific situation.
Tip #9: Enlist help early.
Which leads us to our final tip: If possible, call us early in the process. We’ll not only provide you with key guidance on what you should do ahead of time to prepare your current home for sale, we’ll also help you narrow down your list of must-haves and wants for your next one. That way, you’ll be prepared to act quickly and confidently when it’s time to list your house or make an offer on a new one.
It’s our job to guide you and advocate on your behalf. So don’t be afraid to lean on us throughout the process. We’re here to ease your burden and make your move as seamless and stress-free as possible.
BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET TAILORED ADVICE THAT WORKS FOR YOU
Buying and selling a home at the same time is challenging. But it doesn’t have to be a nightmare, and it can even be fun. The key is to educate yourself about the market and prepare yourself for multiple scenarios. One of the best and easiest ways to do so is to partner with a knowledgeable and trustworthy agent.
A good agent will not only help you evaluate your situation, we will also provide you with honest and individually tailored advice that addresses your unique needs and challenges. Depending on your circumstances, now may be a great time to sell your home and buy a new one. But a thorough assessment may instead show you that you’re better off pausing your search for a while longer.
Contact us for a free consultation so that we can help you review your options and decide the best way forward.
- Board of Governors of the Federal Reserve System, FEDS Notes – https://www.federalreserve.gov/econres/notes/feds-notes/housing-market-tightness-during-covid-19-increased-demand-or-reduced-supply-20210708.htm
- Federal Reserve Bank of St. Louis, FRED Economic Data – https://fred.stlouisfed.org/series/MSPUS
- Realtor.com – https://www.realtor.com/advice/sell/what-is-a-rent-back-agreement/
- Bankrate.com – https://www.bankrate.com/real-estate/sell-your-house-while-buying-another/
- National Association of REALTORS – https://www.nar.realtor/blogs/economists-outlook/seasonality-in-the-housing-market
Santa Barbara Real Estate Sales for the month of July 2021, using data straight from MLS as compared YTD to Santa Barbara Real Estate Sales in July 2020.
Want even more Facts and Figures on the Santa Barbara Real Estate Market?:
For Single Family Homes, the average home price in Santa Barbara is now $3,096,927, and the Median Sales Price is up to $1,927,500.
Total home sales in Santa Barbara are up 48% to a grand total of 1355 (as compared to the Santa Barbara Real Estate Sales in July 2020), 956 of those were single family homes in Santa Barbara, and 399 were condos.
Here is a breakdown by area for Santa Barbara houses for sale:
Notes from Michelle King, Santa Barbara Realtor: Here is the data pertaining to Santa Barbara Houses for Sale, as compared to the Santa Barbara Houses SOLD in 2020, along with some insight on where the market is headed: In July 2020 the median sold price was $1,733,000., whereas the median sold price for 2021 is up to $1,924,000.
Currently, there are 118 houses that have sold, and 146 that are pending. The average price for the 118 Santa Barbara houses for sale is $3,182,872, with the highest price being $17m (945 Lilac Drive) and the lowest at $745,000 (22 Hollister Ranch). The Average Market Time is 20.
Comparing July 2020 to July 2021, Total Active listings are UP 6%, New Listings are UP 3.8%, the number of properties that went into Escrow is up 30%, and best of all, if you don’t get anything out of this report, get this: The MEDIAN LIST PRICE IS UP 35.8 from last year!
If you’d like to get more info on where the market is headed, check out the 5 indicators on where the market is really headed HERE.
Reversing this a bit, here is the comparison of Properties that sold in 2020 vs 2021 are: Total Sold properties are UP 50%, while total sold volume is up 137%. Interestingly enough, the median Sales price for prices that sold year is UP 40% (to $1,389,000) and the median sales price without Hope Ranch & Montecito is up 34.8% at $1,168,500.
About Michelle King, Santa Barbara Realtor:
Michelle King is a Best of Zillow and 5-star realtor in Santa Barbara, CA. As one of Santa Barbara’s best Realtors, she speaks Spanish and has guided each of her Buyers in acquiring the properties of their dreams, even in this HOT market where multiple offers are often the case. For more information on a specific property or issue, contact Michelle directly!
It’s the old supply-and-demand predicament: Home sales in the U.S. continue at a torrid pace, but the availability of listings remains limited. Buoyed by historically low mortgage rates, buyers keep shopping for homes, reducing the available inventory and sparking a rise in home prices across the country.
News website The Atlantic summarized the sizzling home market this way:
“Pick a housing statistic at random, and it’s probably setting an all-time record. Home prices: record high. Inventory: record low. Percentage of homes selling above asking price: record high. Average time on market: record low.”¹
Meanwhile, homebuilders are contending with an increase in material costs and a shortage of labor. These issues come amid an ongoing shortage of housing. A study commissioned by the National Association of Realtors found the U.S. is coping with a deficit of about 2 million single-family homes and about 3.5 million other housing units.²
So what can we expect from U.S. real estate? Here are five factors that illustrate the Santa Barbara Real Estate Market where the housing market is today and is likely heading tomorrow.
5. ROCK-BOTTOM MORTGAGE RATES TO GRADUALLY RISE
Low interest rates continue to fuel demand from homebuyers. Some experts believe mortgage rates will creep up later this year, but they expect rates to remain near historic lows.3 However, the Federal Reserve signaled in mid-June that it may institute two interest rate hikes as soon as 2023, which could then trigger a more substantial uptick in mortgage rates.4
In June, the Mortgage Bankers Association reported that 2020 closed with the average rate for a 30-year, fixed-rate mortgage sitting at 2.8%. But the association anticipates the average rate climbing to 3.5% at the end of 2021 and 4.2% by the end of 2022.5
“As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, chief economist at Freddie Mac.6
What does it mean for you?
You’ve likely heard the old saying about “striking while the iron is hot.” Well, that phrase applies to the current environment for mortgage rates. It’s impossible to predict with certainty when mortgage rates will rise or fall. So, when mortgage rates are at or near historic lows (as they are today), you should seriously consider taking advantage of those rates to borrow money for a home purchase or to refinance your existing mortgage.
4. HOME PRICES EXPECTED TO KEEP CLIMBING
Low mortgage rates are sparking interest among homebuyers, but some are running into affordability issues.
In June, the national median list price for a home reached an all-time high of $385,000, up 12.7% on a year-over-year basis.7 And according to the Home Buying Institute, various reports and forecasts indicate home prices will keep climbing throughout 2021 and into 2022.8
While this may be welcome news for homeowners, high prices are pushing homeownership out of reach for a growing number of first-time buyers. In a recent CoreLogic survey, 82% of respondents listed housing affordability as a key problem.9
“Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,” said Frank Martell, President and CEO of CoreLogic. “As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.”9
What does it mean for you?
If you’re a buyer waiting on the sidelines for prices to drop, you may want to reconsider. While the pace of appreciation should taper off, home prices are expected to continue climbing. And rising mortgage rates will only make a home purchase more expensive. (Determine if this impacts your net worth HERE~!)
3. SINGLE-FAMILY HOME SALES REMAIN ROBUST
While record-high prices are sidelining some buyers, the impressive pace of single-family home sales marches on.
Single-family home sales are down from their peak in October 2020 yet are still above the overall level last year. In May 2021, 5.8 million existing single-family homes were sold in the U.S. That’s a 45% increase over the 4 million homes sold in May 2020.10
However, home sales saw a 0.9% dip in May 2021 compared with the previous month, the National Association of Realtors says. That was the fourth straight month for a decline in home sales. The number of home sales has slid recently because of rising prices coupled with a shortage of available homes amid intense demand.10
Fannie Mae expects total home sales to tick up slightly in the fourth quarter and finish the year up 3.8% over last year. They also forecast a slight decline of 2.2% in sales volume in 2022.11
What does it mean for you?
The market for single-family home sales remains quite active. As a result, if you’re a homeowner, you may want to ponder whether to sell now, even if you hadn’t necessarily been thinking about doing so. With demand high and inventory low, your home could fetch an eye-popping price.
2. LACK OF INVENTORY STILL CONSTRAINS THE HOME MARKET
According to the National Association of Realtors, in May there were 1.23 million previously owned homes on the market, down 20.6% from the same time last year.10 This translates to a 2.5-month supply of homes, which is well below the 6 months of inventory typically seen in a balanced market.10,12
According to the Realtors group, this lack of inventory translates into tougher searches for buyers and contributes to a rise in prices.10
“Demand for bigger and more expensive accommodations amid the COVID-19 pandemic, which has left millions of Americans still working from home, is driving a housing market boom. The inventory of previously owned homes is near record lows,” according to Reuters.13
What does it mean for you?
If you’re thinking of selling your home, now may be the right time to do it. Across the country, it’s a seller’s market, meaning demand is outpacing supply. That supply-and-demand imbalance puts sellers in a great position to sell their homes at a premium price. The May 2021 Realtors Confidence Index from the National Association of Realtors found the average home that was sold attracted five offers, and the association says nearly half of homes are selling above list price.14,15
1. CONSTRUCTION OF SINGLE-FAMILY HOMES SEES SLIGHT UPTICK
Frustrated buyers may soon find some relief, however, from an increase in new construction. Economists forecast that 1.1 million new houses will be started in 2021, compared with a predicted 940,000 units just six months ago, with 1.2 million new starts predicted for 2022 and 2023, according to the Urban Land Institute.16
Amid the rise in home construction, builders are coping with rising costs for materials. In April, the National Association of Home Builders estimated that a surge in lumber prices over the previous year had led to $35,872 being tacked onto the cost of an average new single-family home.17
“Shortages of materials and labor have builders struggling to increase production of new homes, though the demand remains strong,” Robert Frick, corporate economist at Navy Federal Credit Union, told the Reuters news service. “Potential homebuyers should expect tight inventories and rising prices for both new and existing homes for the foreseeable future.”18
Builders (and buyers) did receive some good news in June, though: Lumber prices are coming down—although likely to remain above pre-pandemic levels for the foreseeable future.19
What does it mean for you?
Given the issues affecting the new-home market, it may make sense to widen your home search to include both new and existing homes. Your brand-new dream home may not be available, but you might be able to find an existing home that lives up to your vision. Keep in mind that we can help you find either a new or existing home and can advocate for you to ensure you get the best deal possible.
ARE YOU THINKING OF BUYING OR SELLING?
If you’re in the market for a home, you’re ready to sell your house or you’ve simply been wondering whether you should sell, you definitely could benefit from an expert to help you navigate the sizzling hot real estate market. Let’s set up a free consultation to discuss your situation. I can help you figure out your options and come up with a plan to capitalize on the value of your current property or to find your ideal next home.
ABOUT MICHELLE KING, Santa Barbara Realtor:
Michelle King is a 5-star rated, Best of Zillow realtor in Santa Barbara, CA. Her local expertise and real estate marketing strategies are second-to-none. Her clients will tell you she is the Best Realtor in Santa Barbara.
She knows real estate in Santa Barbara she is able to get her buyers’s offers accepted, in an environment where multiples are the case.
Contact Michelle directly to discuss your plan for Santa Barbara Real Estate.