Over the last year or so with rising inflation and overall increases in the cost of goods we have also seen a drastic increase in home sales which has greatly increased the value of current real estate. If you purchased your home pre-pandemic this might sound like incredible news. Some say home values have increased by an average of nearly 17% which is wonderful for your investment given that a good return from the S&P500 is typically 8-10% in a good year. So the question many of us ponder is “should I sell my home in this hot market?” It’s human nature to want to buy low and sell high so that you can make the most amount of money but in this particular situation it might not be a great idea to sell your home despite the scorching market. Here are some things to consider:

Where are you going to live?

I was speaking with a gentleman the other day who was a former contractor and we had this very same discussion. It’s very tempting to want to sell given the huge increase in value but if you sell your house, where are you going to live? If your property value is skyrocketing then so is every other property within your area. So although you’re going to get a lot of extra cash than when you bought it, that same increase applies to every other home and that extra cash you have will get eaten up with those same increased home prices. So in the end you’re not really upgrading at all but the numbers are just higher. So unless you have other living arrangements or you’re actually relocating it’s probably not a great idea to sell your home just because of the hot real estate market or rise in property values. But are there any exceptions?

Are you in financial trouble?

It happens to nearly everyone. If you’ve ever lost a job or had unforeseen circumstances you can find yourself quite behind the “8-ball” so to speak in regards to your finances. If you’re behind on your mortgage payments or upside down on other loans for vehicles or consumer debt and trying to get back upright then in my opinion selling your home would be a great option. The one good thing about rising prices and inflation is that if you do have debt it becomes less valuable as well. The large increase in profit from your home in a hot market could offset or even put you right side up when it comes to your financial situation. Although you will have to find another place to live, having that debt burden relief can be quite refreshing to your soul and give you a new lease on life. We all know the market will not stay this hot forever and can also crash at any time as we learned back in 2008. So if you find yourself in financial turmoil then selling in this hot market is the right option for you.

Do you own more than one property?

If you have only one primary residence I would lean towards NOT selling your home given the current “hot market”. However I would be a lot more likely to sell a second home or rental property that maybe I’ve been looking to unload. An 8-10% return on your investment is amazing and getting a 17% return is almost too good to turn down. As any investor knows the key to winning with investments is to “buy and hold”. The question is what’s more important to you? The investment or the immediate cash? We know that at some point the market will correct itself and prices will adjust but we don’t know how much and how much we could possibly be leaving on the table especially in the short run. It’s just important to ask yourself what the most important priorities are for you and your particular situation. 

So, should you sell?

Absolutely, you should at least look at the market and consider the huge potential return on your investment you could be getting. But take a hard look at your individual circumstance such as where you are going to live or your financial situation to see if that makes sense for you. Regardless of the market you will have to live somewhere but if you are looking to sell then selling when the market is hot is the time to do it.