We keep clutching our pearls waiting for the next rate drop. Then we get insulted. A zero point two five ‘drop’?? Behind some heavy mahogany door, wealthy men are laughing. That’s the picture I have in MY head.
I did a quick check of a 400K home price (which reflects a first time buyer price here in the Triangle). At a THREE PERCENT interest rate, thirty year mortgage, zero down, the principle and interest payment would still be $1687. That does not include taxes, insurance and HOA. My advice? Download a loan calculator and LOOK at what your payment will be (approximately, but close).
The problem is overly inflated house prices! The days of frantic buying are over. I heard we’re 6 months (cognitively) behind reality. We are watching more and more inventory being flooded into a stagnant market, listings sitting longer and longer, prices dropping and dropping, and buyers languishing while shopping, with no sense of urgency. My goodness, what will it take for reality to settle in? We are still ‘whistling past the graveyard’.
Builders are offering rate buy downs? That’s the same as an adjustable rate mortgage folks, and one day that rate will ADJUST to a number you may very well not be able to pay. The wording is different, the result is the same…as in 2008. Ask questions: What will my payment be if the rate goes to 7%? See how you like THAT number.
Buyers, I’m saying this: You now have leverage. Finally, you are not over a barrel. Use your leverage, and as one YouTube creator said, “Be careful not to catch a falling knife”. An adjustable rate mortgage is not always a bad thing, unless you do not understand it inside and out. My first mortgage was an adjustable rate, but at a time when rates were in the stratosphere. Nowhere to go but down. AND I could refinance anytime after the first year, BEFORE the rate adjusted, at no cost to me. Use your mind and your leverage.
Want to chat about it? It’s free to call me. I’m Brenda with Premier Advantage Realty.
There are a lot of reasons to feel optimistic about the future, but if you are expecting 3% interest rates again, you’re gonna be disappointed. What we have now in upper 6’s lower 7’s is still incredible rates. Full disclosure, my rate is 3% and I’m not going to go UP to 7%. BUT, if you haven’t had a 3% or lower rate, well, this is reality now. BTW my first mortgage rate was over 14% with a perfect credit score. Shew. Glad those days are over. For most people, though, it’s not about the rate; it’s about the resulting payment amount and that is tied to price.
When you hear a market report, and I’ve said this before, remember that real estate is local. Local local local. Example, if you life in Raleigh NC, you will be the last market to fall and the first to rise. Why? We are a fire ant colony, so there’s a lot of demand and that’s the lowest, simplest reason. Lots of people needing housing. But we are also full of universities, colleges, teaching hospitals, regular hospitals and healthcare sites, manufacturing, service providers and dare I say it? Wealth (not me). So we bring in, last metric I heard, 70 people every day. That creates demand and that’s good for a market.
Our market crashed in 2008 for a few months before it started climbing out. I describe it as bumping along the bottom and then suddenly, an uptick. I bought my house during the early stages of the climb, by the way. Other nearby markets stayed down lower and longer, by the way, because in some cases there was no market for their homes. No demand.
Let’s talk home prices. In my area the MEDIAN price has gone up about 2% to the 400’s. And folks, please know there’s a difference between MEAN and MEDIAN. Mean is an average of all prices. Median is just the middle of the scale, period. An increase in median means the prices have gone up overall and more homes in the higher prices are selling more often. Higher priced homes selling more can mean (and does in my market) that there aren’t any lower priced homes fit for most lower end buyers. The whole market has risen, in terms of price. Now I don’t like that because many buyers have been pushed right out of the market, had their dream of home ownership stolen from them. And I’m talking about hard working educated people. Very frustrating for me, because I love my first time buyers.
First time buyers used to find a home under 200K. Now, first time buyers have a 4 in the first number, very often, and few can afford that. The lower priced homes are often old, suffering from delayed or non-existent maintenance, or are a flipped home with lipstick on a pig, to steal that overused description. Sometimes what is hidden is a huge repair bill sleeping. So…better have a smart real estate agent who knows what to look for. Like me. Because these first time buyers area not aware of the market, they want an acre, 2000 square feet, fenced back yard, pool, clubhouse, modern look…no. They’re looking at a 5 or 6 in the first number there.
The outlying areas are the only places left to find ‘a bargain’. And ‘bargain’ might end up being a monster waiting to strike your bank account.
So in my market, and I know my market, it’s tough. You have to be prepared for reality. Yes, have a good credit score, but also have some savings. Remember, even if you find a seller who will go under contract with a 100% financing buyer, you will still have inspections and attorney fees to pay and that is in the thousands.
I’ve said this 100 times. TALK TO A REAL ESTATE AGENT. It is free to talk and gather information. A good agent can prepare you and even give you some ideas of good lenders to TALK TO, so you have that data point as well.
Notice I said TALK. You are NOT going to text your way through a real estate transaction. And besides, studies are showing how spending your time with your head bent down to a phone or computer is keeping you from getting good jobs. Why? Because you have zero people skills. So communicate by talking. Learn those ropes. And if I can help you, I’d be honored. I’m Brenda at Premier Advantage Realty. Call and ask for ME. I do not charge any ‘consultation’ fees.
I was on the phone with a car insurance person the other day, and she said, “You have such a pleasant voice.” Isn’t it interesting?
Hey, have a wonderful day out there! Thanks for reading!
JUST KIDDING. I just needed to say that. I should say, “Here we go again”, as we enter a falling/stabilizing market and news tells us there’s going to be a crash. I watched a video last evening, one published five months ago, saying, “It’s here! It’s terrible!”. Well it’s not here; there is no crash.
Yet.
Listen, we are approaching an election year, interest rates are up and going up ‘one more time’ this year, everybody’s budget is ruined due to the economy, meaning food and gas prices, light bills, water bills, you name it. Yep, a perfect storm for real estate. And why on God’s green earth would anyone give up a 3% interest rate for a 7.2% one?
What I WANT to say is that you cannot materialize buyers and sellers by pounding on agents or paralegals or real estate Brokers-in-Charge. Pound away! The economy is still in the toilet. I’ve seen this behavior SO many times: Oh let’s have a MEETING to discuss HOW WE CAN GET AGENTS to bring contracts in.
I know how: Fix the economy. If you can’t DO that, go away and stop acting like real estate agents can magically materialize transactions. There are still transactions happening, but on the hot heels of a ridiculously inflated market, anything near normal is going to look like actual hell. So calibrate, is what I’m saying.
Real Estate is LOCAL. That’s the first and foremost thing to remember. Your particular market may be different from all others…like if you live in proximity to a waste treatment plant. But in general, as we see interest rates rising, here’s what I see happening. SEE as in visualizing the future.
First time buyers, or those who can’t put away tens of thousands of dollars in savings, are in even worse position to try to get in the market. We’ve already seen that demographic pushed out by exorbitant due diligence fees and high ‘above list price’ offers. Some of them could still compete with help from family, but if you pile on high food and gas prices, which push everything else higher on top of rising interest rates, money for a house payment has disappeared like smoke.
Having said that, my theory is that the government will push rates up until they stall the market entirely, then they will back down. I’ve seen this SO many times. It’s all relative, however. Pushing up to 10 percent and backing down to 9 isn’t going to help my young buyers at ALL. And yes, I said government, because lenders and government are one. We all know, or should know, that.
So what I see is that people with high paying jobs and wealthy families will be the ones to backfill the entry level buyers. In other ones, the ‘privileged’ ones will be the buyers, unless some kind of program is introduced. I’m not a fan of giving everything to people who are not willing to work. I’m talking about the ones who work their fingers to the bone every day and still cannot afford to buy a home. That’s the group who need a hand. It happens to be my favorite group to serve in real estate, because helping someone get their first house is an honor.
In my market as of today, I don’t see the market suffering much. Except that I am very upset about entry level buyers being shut out, I see my real estate business carrying for now. Until the economy crashes. But the buying demographic is changing by the minute.
It’s a great question right now. Listen, I’m an experienced agent and this market scares ME sometimes. The speed is unfathomable and the effect is like that of being on a tricycle on one wheel speeding downhill. There’s no time to think. When my clients ask me whether it is a good idea to wait, I’m torn. Part of me thinks waiting would make sense, because rushing toward anything but ice cream doesn’t thrill me. But then reality sets in and I think rushing isn’t so bad. Here’s why.
First, as we have already seen…are already SEEING, because the trend forming now…interest rates are going up. In this competitive bid market, every dollar counts when you are trying to win the day, and every uptick in interest rate lowers your home search price. Every drop in home price means you have MANY more competitors. Homes below 400K are getting hard to find, at least the ones without ‘issues’, in many cases. And if YOUR price point dropped, so did that of your competitors, so the race will be more fierce.
For my clients, I advise them to make the financial adjustments that will allow them to stay in the hunt, to take advantage of low interest rates. I’m not a financial person, not an accountant, not (thank goodness) a wall street employee, but I think we are heading for an economic correction like we have never seen in our lifetime.
I don’t think we’re heading for a “real estate crash”. Not even close. Demand is too high and supply is too low for that situation to occur. No, I think inflation is going to bite us big, I just don’t know when. Common sense tells me we’re heading that way, and filling my car with gas confirms my assumption. I’m not an accountant either, but I do know you can’t buy a dollar’s worth of anything with a dollar that is now worth 40 cents.
Then we have rising prices for everything from food to gas, and we have supply shortage of everything from PET FOOD to cars. When this shoe drops, it’s gonna hurt. So waiting is actually a bad idea.
Most of my clients are not moving for the fun of it; they are moving because of a need to position themselves for the future, whether it be for the next leg of the journey or for settling into the end of their journey. So the need is there; that’s not going to change. So what I am saying is this:
Go ahead. Don’t wait.
And I know I beat this one into the ground, but hire an experienced real estate agent. This is a brand new market/economic condition which CAN be navigated effectively, but your agent must know what all of the moving parts ARE and how they bump into one another and change things. Your agent MUST know how to protect you in this unprecedented, fluctuating, expensive market.
Speaking of pet food shortage: Mess with my pets and we’re going to have problems. But it seems that’s also happening.
Pending sales dropped for the second straight month, according to data. One more drop and we can officially call it a trend. But does this surprise ANYBODY? It shouldn’t. I currently have seven buyers…SEVEN…and cannot find anything for any of them, though prices range from $150,000 to $685,000. Data published during the first quarter indicated that our existing home inventory declined by 60% over last year. I think it was higher than that.
I complained loudly last year about investors buying up inventory that would otherwise be there for first time buyers, a trend that effectively pushed that group of buyers firmly out of the market. In a few cases, first time buyers were able to go up in price, but generally not; in other words, the market was squeezed from the bottom by investors. I thought that was incredibly unfair to young people trying to buy a home, because that’s an exciting feeling, taking that step to home ownership, and this group of buyers happens to be one of my favorite.
So, investors pushed people UP in price to where first time buyers were in the $220,000 price point to START, thereby wiping out most young buyers from the market. Because investors gobbled up lower price points, stress was put on the next price plateau until that group of homes was eliminated from the market. That happened very quickly, in part because existing homes sold fast, and people SELLING in that price point often couldn’t move up in price due to lack of inventory. So they stayed, and are staying, put.
All along, us real estate agents were able to funnel clients to new construction to circumvent the dearth of resale homes available. You know the result of that. Builders are now completely overwhelmed with buyers desperate to find housing. Waiting lists are being used and LOT PREMIUMS (once a rare thing) are now the order of the day, and now huge. Lot cost has become an add-on. And buildable lots are being put out for BIDS. So now in new construction, you start out overpricing yourself in the market, just to get a lot to build on. And then you have to be able to afford the house that goes on it. Example: A 2×10 board that used to cost 8 bucks is now 32 bucks. Want to guess how that effects new construction?
There has been a desperate charge by agents to find creative ways to get clients even under contract, and the result has been increasing and increasing due diligence amounts being offered to entice sellers to accept offers. This is a dangerous practice for people without tens of thousands of dollars to risk OR buyers who can just afford to do repairs no matter what. In other words, you had better not expect to walk away if you put up a huge due diligence because that money is at RISK. Period. There are other ways to find homes to buy, and I’m doing all of them. But it’s time consuming and the return on effort is low. It’s there, but low.
I hate to say that I wish interest rates would go up, but as bad as that sounds, it will probably have to happen to stop this insanity. I believe we are about to see the market flooded with short sales and foreclosures because of the Covid effect, which brings back memories of 2008. It’s a scary time out here for those of us who are the boots on the ground, so to speak.
SO…if you are planning to buy OR SELL actually, don’t expect things to happen quickly. Be careful how you handle due diligence. Get someone to help you think it through carefully and KNOW YOUR RISK, on both sides of the table, before you take that leap. My fervent wish is that sellers will stop looking at due diligence as a cash-grab, and help this crazy market un-inflame. We don’t have a ‘hot’ market right now; we have an INSANE market, and an insane market is unpredictable and dangerous. I’ve never seen ANYTHING like it, and I don’t like it AT ALL. I can’t predict the future, but I can tell you that it’s not going to be good in real estate. Not without some ‘rule changes’.
So let’s be careful out there. And, first time buyers? Are you there? I am patient and I will work with you as long as it takes. And as of now, it could be years. But you have to know that under 200 thousand, the homes are statistically nonexistent. That means, one pops up on a rare occasion, but it’s largely uninhabitable.
So while you pour over the internet looking for a house you like and can afford, KEEP SAVING YOUR MONEY. And as for due diligence, just know you’ll have to put about 2% of list price right on the table, up front, to even have a shot at getting a house, but you will get it back at closing. Just don’t walk away.
And call me.
I’m at Coldwell Banker Advantage at Wake Forest NC. Ask for me. Let’s talk.
The Perfect Storm is looming. Interest rates are creeping up; housing inventory is shrinking; people are rushing to buy, people who were on the fence for some time. It’s turning into a seller market, for these reasons and one other one that’s HUGE. Multiple offers are commonplace. Great for sellers. Not good for buyers who are used to insisting on paint color being perfect before they even buy, carpet being new in a ten year old house, the right smell, the right temperature. Sellers, celebrate. Buyers, take a deep breath. The world we knew a year ago has flipped.
When sellers have multiple offers on a home you really love, suddenly their repair budget shrinks or yes, even disappears altogether. Some offers are high with ZERO concessions. Suddenly that decor isn’t so bad after all, suddenly sellers are smack dab in the middle of the driver’s seat. And folks, as inventory continues to go away, it’s going to become even more dramatic.
For so long sellers were put through the wringer trying to sell, and now it’s about to swing strongly in the other direction, moving so quickly through the middle ground we’re likely to miss it. If you’re a seller, it’s a great time to have your home listed. Buyers, better get busy, because not only might you have to compete with several others to get the home you love, you’re going to pay a lot more each month as interest rates creep up.
I said, some time ago, that one truism is that the universe WILL balance. It happens in all areas of life, and it’s happening in real estate now. Don’t you feel it? Exciting times. Don’t miss out on the still good prices and interest rates, people. We’re about to see house prices, first on new construction, take a big leap.
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