When is it a Smart Financial Decision to Sell Your Home?

The Shreveport-Bossier City real estate market has seen a major increase in the sale price of homes in recent years, but right now there is a slight cooling in both demand and home value appreciation. Some potential buyers may be wondering: “is now a good time to sell my home? Would it be a good financial decision?” Let’s look at the data and parse out what it means.

Real estate is most often profitable as a buy-and-hold, long-term investment. It protects you against inflation, rising rental costs, and is a smart way to increase your net worth as you head into retirement. So, the longer you live in your home, the more equity you will accrue and the more likely you’ll be able to profit from the sale.

Another important factor to consider is capital gains. When you make a profit on an investment, like the profit from the sale of a home, you must pay capital gains tax. The rate varies and it applies to the majority of investments. In Louisiana, capital gains are taxed as income and the current rate is up to 4.25%. The good news is that avoiding capital gains tax on real estate is a rather simple process. You are exempt from paying capital gains if the home you sell is your primary residence and you’ve lived in it for two years or more. Those years don’t have to be consecutive, but they must be full calendar years.

The housing market in the Shreveport-Bossier City area has the unique advantage of being historically stable even during times of national uncertainty. Take a look at this chart of the Shreveport-Bossier City House Price Index for the last 22 years. What year did you buy your home, and how much appreciation in value have you enjoyed? If you’re not sure what your home is currently worth in comparison to its original purchase price, definitely reach out to the Tammi Montgomery Real Estate Experts and let us put together a Comparative Market Analysis for you.

The major factor current home sellers need to consider is mortgage rates. Current rates are at a 20-year high. So chances are, they’re much higher than the rate you locked in when you first bought your home. If you obtain a loan to buy another home after selling your current one, your monthly payment will likely be higher than you expect.

However, if you’ve accrued enough savings or equity to pay for your new home outright in cash, you don’t necessarily need to worry about those high mortgage rates affecting your monthly payment. But you still need to be aware of how those high rates are affecting potential buyers entering the market. Because those high rates are reducing buyers’ ability to afford homes in the pricier tiers, most homebuyers must consider homes that are much smaller and less expensive than the types of homes they may have been able to afford a year ago. So, if the home you’re wanting to sell right now is in the higher price tier, chances are you might have fewer potential buyers making offers than you would have a year ago. That’s just something to keep in mind.

According to economic data from the St. Louis Fed, home prices in Shreveport-Bossier City have been rising steadily (up 13.24% since this time last year), but we've also noticed an increase in the median Days on Market (56 versus 52 back in 2021), which suggests that home buyer competition is easing off a bit even as the amount of inventory (represented by active listings) rises.

Redfin data shows the average home in Shreveport now sells for 3% less than the asking price. Redfin rates the area as "fairly competitive" with a Compete Score of 50. Bossier City, in contrast, has a Redfin Compete Score of 68, which is similarly regarded as "fairly competitive," and the average home there sells for roughly 2% less than the listing price. This distinction suggests that certain houses in the neighborhood get several offers.

This data shows that even though our region is shifting into a market that is more favorable to buyers, sellers are in a strong position because they are at ease in their homes, have built up a lot of equity since the pandemic, and are hesitant to list their homes and potentially give up the low mortgage rate they secured.

Have you accrued equity to make a profit on your home sale? Not deterred by the current high mortgage rates? Then, yes, there are buyers out there who are still hungry for Shreveport-Bossier real estate, and it may be a smart financial decision to sell your home. However, as we shift to a buyer’s market, sellers will need to ensure that they allow all their home’s best features to shine by making the necessary updates, taking the appraisal process seriously, and working with a savvy real estate agent who can market it to its full potential.

There are a number of reasons you may need to move before selling becomes financially advantageous. Recently hired with an employer out of state? Have your goals changed? Desiring to travel abroad for a while? If you need to move but haven’t accrued the desired amount of equity, you may want to consider renting your home out. Being a landlord is a potentially lucrative way to enjoy passive income while your home continues to gain equity. And since high mortgage rates are currently pricing many potential homebuyers out of the market, more and more people are renting. Renting your house not only keeps your options open but could also give you rental property tax deductions as well as a lucrative revenue stream.

The intricacies of our northern Louisiana market may be too complex to parse out in a single blog post, so if you have questions about your specific home, do be sure to reach out to us. The Tammi Montgomery Real Estate Experts love sharing our knowledge with homeowners and we can discuss strategies to help you get top dollar for your home.

Want to know how much your home is worth? Get a free home valuation and find out today.