This Could Be the Biggest Reason Not to Sell Your Home Today

There's a reason so many buyers have been struggling with today's market. In April, existing home prices were up 5.7% from a year before, according to the National Association of Realtors. And given that housing inventory only sat at a 3.5-month supply that month -- well below the six-month supply that's often needed to meet buyer demand in full -- it's easy to see why it's a tough time to find a home that's suitable and affordable.

However, while it may be a bad time to buy a home, some people will tell you that it's a pretty fantastic time to sell one. The logic is that as a seller, you can benefit from the lack of competition on the market and command a higher price for your home.

I'm not so sure I buy that, though. For the most part, I think it's a pretty bad time to be selling a home unless you fall into one of two categories.

It's not a great time to sell and sign a new mortgage

If you're selling your home with plans to downsize and purchase your replacement home with cash from your sale proceeds, then it could be a good time to list your current home. Similarly, if you're fed up with owning a home and have decided you'd rather rent, then now's a good time to sell as well.

But if you're selling your home and buying a new one with a mortgage, that's a different story. As you may already know, mortgage rates are pretty high these days. Right now, the average 30-year home loan comes with a 6.94% rate, per Freddie Mac.

Plus, home prices are elevated, too. So even if you're downsizing, if you're not able to buy your next home in cash, between having to pay more for a home and signing an expensive mortgage, you may not benefit financially.

Let's say your home was worth $400,000 four years ago but could now sell for $500,000. If you owe $200,000 on your mortgage, you're left with $300,000 (not including any fees you might pay to a real estate agent).

If you're downsizing to a home that cost $200,000 four years ago but costs $250,000 now, you're still paying more. But if you don't need a mortgage, you're at least saving money in that regard. And while you may be paying $50,000 more for that smaller home than you would in a less inflated market, at least you're getting $100,000 more for the home you're selling.

But let's say you're selling your home for $500,000 to upsize to a $750,000 home that cost $600,000 four years ago. Even if you only need to borrow $450,000 because you can use $300,000 from your home sale as a down payment, at 6.94%, a 30-year mortgage will cost you $2,975 a month.

Should you hold off on selling your home?

If you can't afford your mortgage payments or other costs associated with living in your home, then you may want to sell as soon as possible. Similarly, if you're moving for a job, you may have no choice but to sell your home today.

But otherwise, don't assume off the bat that it's a great time to sell. Today's housing market is beneficial to sellers only in theory.

If you're selling to upsize or buy a comparable home in another neighborhood, you could lose out by getting stuck with a higher mortgage rate. And what you gain by selling your home at a high, you may lose by buying your next home at a high. So if selling your home today means having to finance a new one, you may want to wait.