How aggressive should I be about the sale price of my home?

Posted by  on Sep 30, 2014

Q: Mortgage rates are still low, and I understand home prices are rising. I'm about to sell my house. Under those circumstances, does that mean I should name a high price and wait for someone to meet it?

A: Unless you live in an area of the country with an especially hot real estate market, pricing too aggressively could be a risky strategy.

Home prices are still rising, but the pace of these increases is slowing. This appears to be due to falling demand. The Mortgage Bankers Association reported that, in early September, applications for purchase mortgage loans fell to the lowest level since February. You will want to look at specific conditions in your neighborhood, but this national trend is a signal not to take continued increases in home prices for granted.

Mortgage application activity is slowing even without a rise in mortgage rates, but that is the real risk the housing market faces. According to Federal Reserve figures, 30-year mortgage rates remained just over 4 percent as of mid-September, but it remains to be seen just how long rates can stay at such an extraordinarily low level. Any flare-up of inflation, or perhaps a shift in monetary policy, could send mortgage rates sharply higher. With mortgage activity already beginning to slow, a rise in rates would have a very dampening effect on demand for housing.

In short, you may think time is on your side; but the longer you take to sell your home, the more you run the risk that mortgage rates will rise and stifle the market.

Those are some market-based reasons why you should not be overly aggressive when pricing your property. Some of this also depends on your situation. You may have time to wait patiently for someone to meet your price, even if it takes a long time. Most people though, once they put their homes on the market, would prefer to get the sale done at a reasonable price and move on.

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