Sell Now? Or, Wait Another 1-2 Years.

Posted by urbandigs

Tue Dec 20th, 2005 04:26 PM

nyc real estate

A: If you intend to SELL within the next 1-2 years, and you qualify for 1 of the 2 most popular Tax Benefits (see post), then YES, plan to put your apartment on the market NOW, and specifically in the middle of January.

With interest rates still moving up and the current consensus being another one 1/4 point rate hike, possibly 2, it might be wise to cash out in the coming months as year end bonuses bring buyers back to the market.

If 30YR fixed rates are around the 6% mark right now, they will most likely move to the 6.375% - 6.5% range by this time next year, making it more expensive for buyers to borrow money for housing. While that is not enough to cause a nation-wide or city-wide housing crash, it is enough to slow down the housing market. From a risk-reward standpoint, it seems there is more downside risk than upside risk as we move towards the end of 2006.

If you own your apartment and were thinking of selling in the next 1-2 years, it might be safest to sell sooner rather than later, and take your profits to a 4% yielding money market account; such as After all, 4% is not all that bad!

If you have owned and lived in your home for at least 2 out of the last 5 years OR if you intend to put your profits to work in real estate that is of equal or greater value than the property you just sold, it is also advised to sell your property sooner rather than later.

However, if you do qualify for either of these tax advantages but you planned on living in your home for the next 10 years, then try as best as you can NOT to evaluate what MIGHT happen in the housing market over the next 1-2 years. Over the long haul housing has proved time and time again to be one of the most solid investments you can make, and there are certain circumstances that would lead me to advise you to sell now. If those circumstances do not fit your long term investment plans, then dont act irrationally.

MY PREDICTION: Expect a housing correction between April 2006 and December 2007, leading to a good buying opportunity during the summer of 2007. Those homebuyers who have bought more property than they can afford and rationalized the purchase by taking out a short term creative mortgage product, will find themselves paying hundreds more in monthly costs as their ARM's expire. As sad as it is to me, expect disgraced homeowners to be forced to sell their properties at a loss over the next few years, when they discover they cant afford their mortgage payments.