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Feb 1 - We experienced a huge increase in demand during January, though this was from an extremely low level as of January 1.

The number of listings under contract rose from 5,456 to 7,810 an increase of 43%. This is by a wide margin the highest percentage increase we have ever measured from one month to the next. It shows us that buyers are getting used to interest rates of around 6%. It helps a lot when sellers are willing to help them buy down the initial rate.

Pending listings increased by almost 40% while UCB listings jumped over 50%.

It is time to drop the Skepticism and enter the Hope stage of the cycle. In most market cycles this diagram takes 3 to 5 years to pan out. However, we have moved from Euphoria to Hope in just 1 year. I suppose this is the result of the increased speed of communication.

Listings are going under contract so quickly that the supply of new listings cannot keep up, despite a much higher flow of new listings than we saw in December. We are heading back towards a supply-constrained market and it is likely that prices will start to move higher within a short space of time. Asking prices are moving upwards quickly and these are usually a leading indicator.

While there is no guarantee that mortgage rates won't go higher again, 2023 has started out much stronger than anyone expected back in November. This underscores why it is important to track the market daily, not just once a month.

© 2023 Cromford Associates LLC - Commentary by Michael Orr

Should You Rent Your House or Sell It?

If you’re a homeowner ready to make a move, you may be thinking about using your current house as a short-term rental property instead of selling it. A short-term rental (STR) is typically offered as an alternative to a hotel, and they’re an investment that’s gained popularity in recent years. According to a Harris Poll survey, 28% of homeowners have considered using a rental service to temporarily rent out their home for additional income.

Owning a short-term rental can be a tempting idea, but you may find the reality of being responsible for one difficult to take on. Here are some of the challenges you could face if you rent out your house instead of selling it.

A Short-Term Rental Comes with Responsibilities

Successfully owning and renting a house takes work. Think through your ability to make that commitment, especially if you plan to use a platform that advertises your rental listing. Most of them have specific requirements hosts have to meet, and it takes a lot of work. A recent article from Bankrate explains:

“Managing a rental property can be time-consuming and challenging. Are you handy and able to make some repairs yourself? If not, do you have a network of affordable contractors you can reach out to in a pinch? Consider whether you want to take on the added responsibility of being a landlord, which means screening tenants and fielding issues, among other responsibilities, or paying for a third party to take care of things instead.”

Not only is there the upfront time and cost of owning a short-term rental, but there are also risks that could come up for you down the road. Investopedia warns:

“Risks of hosting include renting your place to rude guests, theft or damaged property, complaints from neighbors, and potential regulatory violations depending on your location.”

There’s a lot to consider before taking the leap and converting your house into a short-term rental. If you aren’t ready for the work it takes, it could be wiser to sell instead.

Your House May Not Be Ideal for Your Rental Goals

Not every house ends up being a profitable short-term rental either. One of the biggest factors is where your home is located. The less likely your neighborhood is to be a travel destination, the fewer requests you should expect from potential renters—and that impacts your bottom line. An article from the National Association of Realtors (NAR) advises:

“When it comes to the viability of profitable STRs . . . consider factors like location, amenities, and whether the property is appealing. Most people seek STRs in locations where they vacation, so proximity to attractions is important. Likewise, the property should cater to a variety of travelers.”

It’s smart to do your homework and learn how much rentals in your area go for, how much business they get throughout the year, and how this compares to your goals.

Bottom Line

Converting your home into a short-term rental isn’t a decision you should make without doing your research. To decide if selling your house is a better alternative, talk with a local real estate advisor today.