When do I sell?

We’re constantly asked this question, so we wanted to take time to direct you on the best way to think about market timing.

The first thing to understand is that this question does not have one answer. The explanation for this is that there are 100 different markets that shift every day in the region. Supply and demand are in continuous flux and are not separate from the stock market. As a consequence, each neighborhood has many distinct markets that do various things.  As an example, let’s look at the Lake Forest elementary market in El Dorado Hills. This demand consists of vintage rehabs, renovation of 10-20 years old & new construction. There are widely varying price ranges, inventory levels and levels of demand within each of these markets. That said, the first thing you have to do is understand your specific market when looking at when to sell.  Each one of these markets is very distinct. One of these Lake Forest markets may be a market for sellers at the moment, while the other is a market for buyers.

If you’ve defined the specific market, it’s critical for your property to look at the current and historical data for that particular market. To assess patterns and current conditions, we look at a couple of big inputs. The number of units available (monthly supply) and the number of units going under contract are the two key measures we want to look at (monthly demand).  This allows us to assess if there are historical patterns that indicate an optimum timeline for sale. There are very strong patterns sometimes and there are no trends at all sometimes. We can determine when is the most appropriate time to list based on that data. Furthermore, It’s important to note that it doesn’t mean that history can repeat itself only because the market has done very similar things over the past three years in March.

Potential owners are also often asked whether they can rent the property out for a few more years in order to gain more value instead of selling now. This is a valid issue as the business has expanded over a span of many years. Our advice is to begin with the presumption that for the next 2-3 years, we don’t know what the market is going to do. Anyone who tells you what the business is going to do is not an advisor to listen to.  You would never have trusted a financial planner who advised you to purchase a stock that he knew would go up for the next two years. Why? That’s basically because nobody knows. Markets’ essence is that they go up and down. They don’t just go up. We completely endorse this if you want to rent and take a chance on more appreciation. It is definitely possible to continue to enjoy the market. That said, we also suggest thinking about what happens if in two years the market drops 10 percent. Is this going to cause you stress? Are you comfortable keeping the property longer before waiting for a recovery?  You can ride the drop off as long as your rental income meets your mortgage, but you will own the property for a longer time than you planned.

I hope this helps to provide you with a better understanding of market timing as it relates to sales. As always, for any specific questions you have about your house, feel free to reach out to us.

Christopher