We get asked this question regularly so we wanted to take time to walk you through the proper way to think about market timing.
The first thing to understand is that there is not one answer to this question. The reason being is there are 100 different markets going on throughout the city that change everyday. The supply and demand is in constant flux and is no different than the stock market. As a result, each neighborhood has several different markets that are doing different things. Lets look at the 1BR Bucktown market as an example. This market consists of vintage rehabs, 10-20 year old construction & new construction. Within each of these markets there are widely varying price ranges, inventory levels and demand levels. That said, when looking at when to sell the first thing you have to do is understand your specific market. Each of these markets are very different. One of these 1BR markets could currently be a sellers market while the other is a buyers market.
Once you've identified the specific market that your property is a part of its important to look at the current and historical data for that particular market. We look at a few major inputs to determine trends and current conditions. The two major indicators we want to look at are the number of units available (monthly supply) and the number of units going under contract (monthly demand). This helps us determine see if there are historical trends that suggest an optimal selling timeframe. Sometimes there are very clear trends and sometimes there are no trends at all. Based on that information we can decide when is the most sensible time to list. Additionally, its important to understand that just because the market has done very similar things the last three years in March, it doesn't mean that history will repeat itself.
We are also often asked by potential sellers if they should rent the property out for a couple more years to achieve more appreciation rather than selling now. This is a logical question when the market has been growing over a several year period. Our advice is to start with the assumption that we don't know what the market is going to do for the next 2-3 years. Anyone that tells you what the market is going to do is not an advisor to be listening to. You would never trust a financial advisor who was telling you to buy a stock that he knew was going to go up over the next two years. Why? Simply because no one knows. The nature of markets is that they go up and down. They never just go up. If you want to rent and take a bet on further appreciation we fully support that. It is certainly possible that the market will continue to appreciate. That said, we also advise thinking through what happens if the market drops 10% in two years. Will this cause you stress? Are you comfortable holding the property longer to wait for a recovery? As long as your rental income covers your mortgage you can ride the drop out, but you will be owning the property for a longer period than you anticipated.
I hope this helps give you a better understanding of thinking about market timing as it relates to selling. As always, feel free to reach out to us for any specific questions you have about your property.
JB
