With the real estate market continuing to grow at a rapid pace, many homeowners are wondering if they should cash out – take the money and run! Since every person’s situation is unique, that is a tough question to answer in a simple way. However, if you are thinking about a change of pace, change of scenery, and have a different plan for housing, cashing out may be an interesting option to consider. Below are some other things to think about:

The Market – The market could shift with rising interest rates. According to Freddie Mac, average mortgage interest rates hit 5% as of 4/15/22 – the highest they have been since February of 2011. With more possible bumps in interest rates in 2022 and beyond, the buyer frenzy may be tamped down a bit in the future, although there is such a shortage of homes for the number of people searching for homes that I don’t see demand waning anytime soon – meaning we don’t think that home values will be decreasing, but the rise in values may slow. 

Your Long-Range Plans – If you are thinking about selling and cashing out now, renting, and then buying another home when prices drop (the equivalent of selling high and buying low) there may not be a low point for you to buy into. As said previously, prices don’t necessarily have to come down. We haven’t satiated buyer demand and still have a lack of housing product. Therefore, prices may indeed continue to rise, albeit perhaps slower than they have. Think about most of the commodities we buy. Do you think we will see a return to gas at $1 a gallon or bananas at $.25 a pound? We don’t expect home prices to come down to make this strategy worth pursuing at this point. 

Your Location – Are you moving to a less-expensive area in terms of home values and rent? If you are thinking about selling, staying in the immediate area, and paying rent, understand that rent will continue to increase because the demand for housing is still high. Let’s say you want to rent a three-bedroom house with current rent at $3,000 a month. If rent increases 5% per year, in five years that rent might be $3,850 per month. However, if you have flexibility in your location and are moving to a less-populated area with less demand, then rent may start much lower and may not increase as quickly. 

Situations in which it may make sense to sell and cash out:

Before you make any decisions, let’s take a look at the numbers together!

  • You plan on making an offer on a home in the future and want to make a non-contingent offer
  • You plan on moving out of the area in a short timeframe
  • You want to completely change your lifestyle (such as travel or work abroad)
  • You are getting ready to retire or want to downsize, aren’t sure what that life will look like yet, but know it will not include your home.
  • You no longer want to/have time to/have money to maintain your home

There are definitely pros and cons to doing this, including other financial implications. This is not a decision to be taken lightly. We are happy to help you weigh your options!

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