Selling a Home in 2019 vs. 2020

sebfreyCommentary, Local, North Monterey County Real Estate, Santa Cruz Real Estate, Silicon Valley Real Estate

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Is this In Your Future?

One of the most popular pages on my website in 2018 was an article where I addressed the perennial question, “Is it better to sell my home this year, or next?”  In that posting, I opined that the preponderance of evidence is that 2018 was shaping up to be a pretty good year for home sellers.  Today many sellers are wondering about selling a home in 2019 vs. 2020.

In last year’s article, I said that given a choice, it would be better for homeowners to sell in 2018 rather than rolling the dice on 2019, as the economic forecast for 2019 was cloudy. Now that we’ve flipped the page into 2019, I can say it looks like the jury is in on this one:  2018 was the peak year for this real estate market cycle.  The question before us today is, I think:  will 2019 prove to be a good-but-not-great year for sellers – or will it be the year the market falls off a cliff, again?

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Why The Real Estate Market Has Gone Soft

The State of the Market

After much thought and analysis, it seems to me that the softening of appreciation in home prices is due to the market finally reaching the limit of affordability.  In Santa Cruz county, only 12% of households can “afford” a median-priced home (with a 20% down payment).  In Santa Clara county that number is 16%.  In Monterey county, it’s 19%. It looks like what we’re seeing today simply comes down to the fact that buyers simply can’t afford to pay more for housing, so the market has stalled out.

In 2019, taxpayers will be filing their 2018 tax returns and will be looking at how the reduction in SALT and Mortgage Interest tax deductions will alter the calculus for renting versus owning a home – and for the most would-be buyers in the greater Bay Area, owning a home won’t pencil out favorably on a month-to-month cost basis. I believe this is going to act as a further drag on home price appreciation in the short term, and if there’s any one current factor that’s going to actually bring down prices in 2019, I think this is it.

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The big worry though is something that hasn’t happened yet, but might:  recession in 2019.  A recession is coming.  A recession is always coming, it’s just a question of when, how severe, and how long it lasts.  If a recession comes in 2019, then yes, housing prices will slide, and probably precipitously.  The forecast is even darker for 2020, with some analysts predicting another full-blown financial crisis.  As most of us remember, selling a home during a financial crisis isn’t a really good idea.
Which is why my advice for homeowners in 2019 is:  if you’re asking yourself if it’s better to sell in 2019 vs. 2020, the answer is 2019.  And if you’re asking when in 2019 is the best time to sell, my answer is:  the sooner the better, because it doesn’t look like waiting is a winning strategy, especially given what we’ve already seen in the last half of 2018.

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