The real estate market has been sick for years. It has had a fever. An extremely high fever at that. The past 2-3 years has been historically ridiculous. Historically, traditional real estate markets appreciate 3-6%. The market over the last two years skyrocketed at an average of about 17%. We don’t need to cover why it happened other than pointing to a housing shortage for the growing US population and exceptionally low mortgage rates that kept affordability at an artificially low level.
That has come to a screeching halt (you will hear the word DECELERATION a lot in the next 30-45 days) since the interest rates for mortgages increased by 2-3% in the past 4 months. If you were thinking of selling, well, you probably missed the top of the frenzy. That was the summer of 2021. We don’t see the top until we are on our way down – that is always the case in the real estate cycles.
Don’t worry, though. We are talking about strategies for the market right now.
There are still a lot of buyers that need homes. Rents are still extremely high, and there are still not enough houses on the market. The only thing that changed is the interest rates. That is all. I mean, it is a big deal, but that is all that has changed to shift the market.
Okay, so let’s get into 3 strategies to look at if you are buying or selling in the current market.
- If you are Selling, your house needs to be the shiniest object to get top dollar. I will explain.
- If you are Buying, you need to get the seller to pay for a rate buy down to save you thousands. Again, I will explain.
- If you are Buying or Selling, get the data, and please, stop listening to the clickbait headlines!
The Shiniest Object
Buyers are tired after getting dragged through the mud the past 2-3 years. Seriously, they were willing to do almost anything to get their offers accepted. It was absurd what many agreed to or offered just to get a house. Sellers will feel a bit of payback as things shift to a more neutral market. We have already seen it happening. In June, just about 15% of all homes that were under contract were canceled. That’s the highest number of cancellations since the start of the pandemic. The main reason – buyers aren’t waiving contingencies, so they’re able to back out of the purchases without penalty.
Sellers placing their homes on the market need to know that the market is no longer the same as it was, and they need to price their homes accordingly. Sellers can still get top dollar, but the home must be the best buyers see. Most buyers choose a neighborhood or city they will search in. Then at any given time, there are a certain pool of buyers that are looking in that area. There will be a pool at different price points and lots of other factors, but for our purposes, let’s just say there are 5 buyers for 3 houses in a neighborhood. All the buyers are likely to look at all the houses in that neighborhood. If there is a clear winner, a most beautiful house that is priced competitively with the other 3 houses, the buyers will likely all make offers on that clear winner. The shiniest object gets the attention.
The only way to compete is on price if you do not have the cash or ability to make your house the shiniest object. If you are in that situation, we have a program to help. You can get cash to move up front and then have someone else fix your home up to be the shiniest object, and then you can reap the benefits (profits) when your house sells with the renovations completed. No hassle, no showings, etc. Seriously, call me. I will explain the program, and we can get started.
If your house is already the shiniest object. Let’s get it listed! We can still get you top dollar. The thing is buyers won’t make an offer on a crappy house just to get into something. Those days are over.
Buyers – you have more negotiating power, but you need to be smart about how you use it. You need to think long-term and while making an offer under asking price is great since it feels like you got a deal, there is a better way to negotiate.
Let’s say you’ve convinced the seller to give you $15,000 to use as you’d like. That could go toward a lower purchase price which will save you a couple of bucks each month on your mortgage payment. Maybe you want closing costs covered, which will keep money in your pocket. But a better way to spend that money is by buying down your interest rate.
Yes, you can buy down your interest rate. $14,000 can lower your interest rate by just about an entire percentage point. On a $600,000 home, that savings per month would be close to $100 per month and over $60,000 over the life of their loan. Not a bad idea, right?
Don’t Fall for Clickbait
Lastly, don’t fall for clickbait articles. If you look at the news, it is nothing but bad news. They lure you in with a title about how the housing market is about to crash, but the truth is, home values are still increasing. No, not like they have been, but there have still been slight monthly increases.
It’s important to look at actual data that will give you an idea of the state of the real estate market. Foreclosures are low. Inventory is low. Equity is sky high. Those are good things for the real estate market and mean that a crash is highly unlikely.
Instead of reading through doom and gloom articles written by people who probably don’t know very much about the real estate market, ask me! I’m out in this market every single day. I see how things are shifting, but not at a rate that is cause for concern. Give me a call if you have questions about the real estate market. Seriously, I love talking about the market – ask me any questions you may have!!