Home prices hit record highs in May, and the market is showing no immediate signs of slowing. With prices skyrocketing, retirees may be considering selling their homes to cash in.
But before you call a real estate agent and list your house on the market, it’s important to consider whether that’s really the right move.
Would retirees be smart to sell?
For many people, retirement is a great time to sell a home. Seniors may be ready to downsize, especially if their kids have left the nest and they are tired of the upkeep of a larger family home. Freedom from work also provides the opportunity to relocate, perhaps to a place that’s more walkable or that has a lower cost of living or better tax rules for retirees.
Selling a home can also free up cash for seniors who might have too little retirement savings. If you have lots of equity in a house, you could cash that in and use it to fatten your retirement savings account – especially if you buy a less expensive new place. If you still have a mortgage, selling could also help you lower your housing costs.
If you’re thinking about selling for any reason, this red-hot housing market presents a great opportunity. If you can sell now when home prices are up, you should hopefully be able to get a lot of money for your house. This would mean you could pad your investment accounts even more and potentially be left with a lot of extra money after paying off any remaining mortgage balance.
But while it is undoubtedly a good time to be a seller, it’s important to remember that it may not be a good time to buy a home. So, if you are going to sell your home, you need to think about what will happen next.
If you sell at a great price and make a handsome profit but end up overpaying for a new house and have to take out a large mortgage loan, then are you really better off? This could be a big issue if you are relocating to a place where the housing market is especially crazy right now.
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There’s also a relatively low inventory of homes for sale at this time. If you are looking for a specific type of property, such as one where you can age in place, then you may not be able to find it. And with lumber prices and the costs of other materials driving up the cost of brand new homes, you may not be able to build an affordable one either.
Of course, you don’t necessarily have to buy a new home after selling your old one. You could rent for a while and wait for the market to cool off (or even rent indefinitely). But, again, you need to research the rental market and see if you can pay an affordable price for a property you’re interested in. And if you’re hoping for a market crash before you buy in again, you could end up waiting years – and spending much of your retirement living in limbo.
So before you decide to jump into selling because you’re enticed by high home prices, think carefully about your next steps. If you can sell and find a place to live at a good price that you’re comfortable with, then go ahead. But if you aren’t confident of where you’ll go after selling your home, then you may end up really regretting your choice.
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