Should You Sell Your House and Rent Until the Market Cools Down?

With mortgage rates rising and inventory opening up, many experts believe that the red-hot pandemic housing market has peaked. That has homeowners considering selling while prices are still sky-high and renting until the market cools so they can buy once again at a more reasonable price and pocket the difference.

It’s a great plan — as long as you can sell high and rent low at the same time.

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“I advise any home seller not to cash out of their current home unless they have a better, more right-sized, profitable and best-life home or apartment lined up to buy or rent next,” said Baron Christopher Hanson of Coldwell Banker Realty. “In other words, selling for a high price and then having to turn around and buy or rent at an even higher price or unfavorable rate is not a good idea.”

The trick is to sell in a hot market and rent in a cooler one nearby.

“The best markets to sell a home and then rent are typically bustling and in-demand job market cities and high tourism or waterfront towns whereby more affordable or rural rental housing exists several miles outside of the sexy city center,” Hanson said.

Here’s a look at where that strategy might work.

Phoenix

When it comes to places where sellers are holding all the cards, expert after expert who spoke with GOBankingRates mentioned Arizona in general and Phoenix specifically.

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“The greater Phoenix housing market is strong this year,” said Ava Martin, founder of Quality Water Lab. “The typical value of the property in this area has increased by 31% and the prices are expected to rise more in the next 12 months.”

Cristina Cason, real estate investor and co-founder of Texas Family Homebuyers, is more emphatic in her opinion of the situation in the Southwest.

“The Phoenix, Arizona, market is a hot mess right now,” Cason said. “More than 50% of houses sold above the listing price. The average increase in selling price was about 33%. On the other hand, the rental market has fared much better. The rental price has stabilized, and it makes more sense to sell your house and rent.”

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California’s Bay Area

As Hanson said, the best markets to sell and rent will be pricey metropolitan hubs with in-demand job markets, a description that fits the Bay Area perfectly.

“If you live in San Jose, California, you should look to sell your house and rent until the market cools down,” said John Riedl, CEO of Easy Cash Offer Florida. “As of 2021, the average home sale price in San Jose exceeds the $1 million mark. This is an opportunity too good to turn down, even if you weren’t initially planning to move.

“The real estate market in the city is very hot at the moment due to the after-effects of the pandemic, and you don’t know how long it will last, so now’s the time to act. You’re probably going to make a profit of over 30% if you act fast.”

Then, of course, there’s the city after which the Bay Area is named.

“San Francisco is one market where you should consider selling your house and renting until the market cools down,” said Tim Schroeder, licensed Realtor and owner of Learning Real Estate. “The massive imbalance between supply and demand in the city has caused housing prices to soar. Currently, the average sale price is over $800,000, so it’s an excellent opportunity for homeowners to make their move. The ROI will be incredible. You can rent until the market cools down, then buy again at the right time. You’ll be left with a significant profit this way.”

Las Vegas

In Sin City, one key metric shows just how out of balance the seller’s market has become — and if you can sell high there, Nevada offers plenty of low-cost places to rent nearby.

“In Las Vegas back in February, inventory was at 0.7 months,” said Jennifer A. Chiongbian, real estate broker and founder of ProRealEstateWriter.com. “For March, it was at two months. A balanced market has six to seven months’ worth of inventory. Selling your home now and renting makes sense to take advantage of the tight market and higher prices, which will eventually correct.”

Pittsburgh

The big city on the far end of Western Pennsylvania — which has plenty of nearby low-cost towns for renters — is currently offering sellers a golden opportunity. But not for long.

“In the Pittsburgh market, sellers have a brief window right now to benefit from the heavily weighted and somewhat inflated seller’s market,” said JoAnn Echtler, a Pittsburgh real estate agent. “With interest rates ticking up almost weekly, we are already seeing signs of a drop-off in buyers, especially in the lower price points.”

With money getting more expensive to borrow, buyers can’t afford as much home and simply won’t be able to put in offers above asking price, as they still are now.

“This could mean a substantial drop in cash-out equity for the seller,” Echtler said, “enough that selling now and taking on a short-term lease — which is still affordable in this market — makes sense. I’ve had quite a few sellers choose this path in the past year.”

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This article originally appeared on GOBankingRates.com: Should You Sell Your House and Rent Until the Market Cools Down?