Having just concluded the prime selling season, owners with unsold homes may begin to ask; “should I rent and wait to sell”? Renting a home that doesn’t sell is not a good decision. It’s better to adjust price, acknowledge the market and move on. The question to ask is “why didn’t my home sell”? The idea to rent and “try again” down the road is never a good one. Save for a very few situations, this decision will result in an even less desirable outcome. It’s fair to say that if the home was listed to sell, then sell it.
Consider the just concluded spring-summer market of 2019 in North Atlanta. Mortgage rates were consistently between 3.5% – 4.3% for most 30 yr fixed loans; down in the low 3%’s for adjustables. By any account, it was a very favorable environment for buyers. Quality inventory remained low and buyers jumped when the right home came on the market, multiple offers were common at every price point. Sellers held the aces; if their home failed to sell it was most likely due to a seller related reason. The most common reason is the most obvious, sellers that do not understand how to price a home for sale.
Data Rarely Supports Renting a Home That Doesn’t Sell
Consider our fictitious seller “Timmy”. His home is in one of the most desirable areas of Marietta, East Cobb zip code 30068. This area is served by Walton High school, consistently ranked near the very top tier of public high schools in the state. Timmy’s home is in the 400K-450K range; a ridiculously active price point but his home failed to sell during the first half of the year. Timmy is a big HGTV fan; he’s considering renting his home and listing again next spring. Let’s look at data here for homes between 300K-600K and examine Timmy’s logic.
Rent Now and List Again in the Spring
And what will be different next spring? Spring is usually the most active market but also the most competitive. This chart shows months of inventory; a balanced market is 3-5 months with below that favoring sellers. A pattern is clear; the first half of the year is the time and everyone knows that. If the house just sat during this year’s market, what makes next year any different? Note 2019 inventory was higher than both 17 and 18; balanced markets are forecasted. What will rates be next spring, the status of the economy, the status of the housing market, the global economy…Figure out why the home didn’t sell, Timmy…
Rent Now and Catch the Rising Values Next Spring
Really? Home values always rise? This idea was tested about a decade ago, didn’t go so well. National reports about housing prices are meaningless; all real estate is hyper local. Timmy’s home is in the very competitive price range of 300K-600K. But where are the price jumps? Over 18 months between Jan ‘18 – July ’19 median list and sale prices have…been largely stable. When the data is further sliced by bedroom count, basements and other criteria we see largely similar flat price trends. Timmy’s home failed to sell in a very busy market, why will next spring be different? Figure out why the home didn’t sell, Timmy…
Rent Now and the House Will Sell Fast in the Spring
Wasn’t the house just listed during the spring? Timmy’s area and price range is one of the fastest moving ones around. It’s also one of the most consistent as this chart shows. Since Jan ’17 to July ’19 median days on market for listings like his ran between 23 and 18. Many markets would kill for 23 days on market, how much “faster” is needed? The ’19 figure looks to be about 20 days on market. If the house did not sell in this robust environment, relisting will likely garner the same results. Every buyer will see that it already failed to sell and this is a relist. Figure out why the home didn’t sell, Timmy…
This type of data analysis is just one aspect of the “rent until it sells” thought process. The other is more direct and impactful; what is the home going to look like after being rented? How is it sold with tenants in it? Who is going to manage the process? What are the legal and tax requirements to being a landlord? What about insurance? How does renting as opposed to selling impact Timmy’s next move? There are challenges here that typical sellers never see coming. There are expenses that typical sellers never see coming.
Renting a home that doesn’t sell is almost always a bad decision. If a home is listed for sale, then sell it. The idea behind renting and “waiting” for the right time can be appealing, so is a daily diet of pizza, sweet tea and Blue Bell ice cream. In the end, both lead to problems. If the decision is to sell, then sell.