: Is now a good time to buy — or sell — a home? Here’s what Americans need to know about the hot real-estate market

Some of those people may be looking to make up for lost time. Around this time last year, real-estate transactions slowed considerably as COVID-19 restrictions on businesses meant that home sales couldn’t proceed in many states. But home-buying came back with a vengeance, as the typical spring deluge of home sales bled into summer — and fall and winter.

In truth, since that initial slowdown at the start of the pandemic, activity hasn’t slowed a whole lot in the real-estate market. The pandemic has fast-forwarded the clock for many families, who find themselves flocking to see homes in more suburban areas to get more space for their growing households. Plus, many people are looking to take advantage of their newfound ability to work remotely and move further out from the dense urban cores across the country to more rural areas where they could save money now that they don’t need to worry about long commutes.

What does that all mean for people looking to buy or sell a home right now? Here’s what real-estate and financial experts say:

Yes, it’s a sellers’ market — but it’s more complicated than you’d think

Home prices have skyrocketed throughout the pandemic, and they’re not expected to drop anytime soon. In January 2021, home prices rose by a staggering 11.2%, according to the S&P CoreLogic Case-Shiller national home price index. Home price growth is happening at the fastest pace since the Great Recession.

Why are home prices rising so fast? Demand for homes is high, but there aren’t many listed for sale right now. Years of under-building has meant that the country is facing a serious housing shortage. Rising demand and dwindling supply is a perfect recipe for higher prices.

That’s good news for those who can sell their homes right now. But there’s just one problem for most sellers: They still need a place to live. “You’re going to be out there among all the other buyers competing for the small number of homes,” said Elizabeth Renter, a data analyst at NerdWallet.

Throughout the pandemic, people who already own homes have remained hesitant to list their properties for sale. To some extent, that’s a reflection of the health risks associated with COVID-19 — and certainly many people were worried about exposing their families to the virus by having showings.

But the short supply of homes for sale has become a vicious cycle, preventing sellers from listing their homes and therefore keeping inventory low.

Anyone who needs to sell should remember that the ball is in their court. Because of the steep competition in the market right now, buyers are willing to make many concessions to make their offer more attractive. Savvy sellers can take advantage of this by asking to move the closing date to coincide well with the purchase of their next home, Renter said.

“If it wasn’t such a strong seller’s market, buyers might not find that appealing,” she said. “However, buyers know that sellers have a list of buyers lined up — so if this doesn’t go through, the seller is probably going to find someone else to purchase their home.”

MarketWatch is here to help you navigate the housing market, with undefined Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.

Sellers shouldn’t get overconfident about timing the market

Higher prices are drawing some sellers to the market, to be sure. A recent survey from NerdWallet and The Harris Poll found that around 1 in 6 homeowners are planning to sell their home in the next 18 months. Among those people, 45% said that rising home prices and falling inventory has prompted them to consider selling earlier than they had originally planned.

But homeowners should exercise caution in trying to game the market, financial experts warned. “Timing the housing market is almost as difficult as timing the stock market,” said Rick Brooks, co-owner of Blankinship & Foster, a wealth advisory firm in Solana Beach, Calif.

“And the transaction costs are a lot higher,” Brooks said.

Some homeowners have begun questioning whether it’s worth listing their homes now to lock in a high price and then renting until they can find their next abode. But that’s a risky move. As Brooks argues, it’s “nearly impossible” to adequately compare the costs of renting a home to owning one because the two markets “don’t always move in tandem.”

Buyers need to come in prepared — in more ways than one

As the wisdom in real estate goes, the best time to buy a home is when you need to because your life has changed. Many people opt to become homeowners after they get married or when they have children as a way to have more control over their housing costs while also building wealth.

That is to say, many people don’t have the luxury of waiting to buy. And again, timing the market can be something of a fool’s errand.

At the same time, it’s easy to get caught up in the emotion of trying to secure your dream home in the midst of a bidding war.

To start, buyers should examine how the trends in their local market compare to what’s going on nationwide, said Danielle Hale, chief economist at Realtor.com. Find the homes have sold recently in your neck of the woods and learn more about them. How long were they on the market? How much over asking did the sell for? Did the buyers have to do major renovations afterward? These details will give buyers a sense of how competitive their local market is.

Then, they need to take on the difficult task of setting a strict budget. “Be really firm on what your house budget is,” Hale said. “I know that’s probably challenging for a lot of buyers in an environment where home prices are rising very rapidly.”

Determine how much you can afford to spend each month on your mortgage, insurance and home maintenance. Use that to determine how much you can afford. And then — here’s the hard part — avoid looking for homes at the top end of that budget. Homes in many markets are being bid up well above asking, and if a buyer lets emotion get in the way they could set themselves up for financial trouble.

Make the largest down payment possible

Many Americans appear to be worried about the possibility of a housing crash. Google searches for phrases such as, “When is the housing market going to crash,” have risen more than 2,000% over the past month. “If we see prices rising as quickly as we have, for some people it might spark some memories of the last time around,” Matthew Speakman, an economist with Zillow Z, +4.54% ZG, +4.07%,  told MarketWatch.

Real-estate experts agree that while the market may cool somewhat — particularly if mortgage rates rise — the chances of the market seeing a downturn like it did during the Great Recession are slim.

That said, buyers can protect themselves and their investment in today’s market. The key is to make a larger down payment. “While low interest rates tempt future homeowners to buy as much house as they can afford, and to put a very small amount down, I strongly recommend clients put at least 10% down on their home,” said Liz Gillette, a financial adviser at MainStreet Planning.

In the first few years of homeownership, buyers build little equity because a larger chunk of their mortgage payment goes toward paying off the interest rather than the principal of the loan. So let’s say a home buyer puts 3% down on a home with a 3.2% interest rate but has to sell — because, as Gillette cautions, “life has a way of throwing us curveballs.” At that point, you’d have built around 9% equity, but could spend as much as 7% in selling the home.

“You’re left with very little to fund your next house down payment,” Gillette said. And that’s not even accounting for the prospects of the property’s value decreasing. A larger down payment provides a buffer against these possibilities.

Of course, saving a larger down payment isn’t straightforward. A new report from the Center for Responsible Lending found that it takes the typical worker 11 years to save up a 5% down payment on the median-priced home. It’s even harder for Black households, who can expect to spend an average of 14 years building up a down payment that large.