Hey guys, when we're talking to a seller and we're having this conversation about price—because price is the ultimate marketing tool that we have—sometimes it's hard for sellers to understand the relationship between the price and interest rates.
So I wanna give you some scripting and some dialogues along these lines, which is really important. And it's focusing on the difference in affordability for buyers and really how most buyers are payment focused.
So if I'm sitting with a seller, I might say:
"Now you've probably been hearing that the interest rates have been rising. But I wanna relate that to what that means to a buyer for your home. So the beginning of the year, interest rates were pretty much at 60-year lows or around 3% level. And since the beginning of the year, we've really more than doubled. We're now pushing 7% and we're probably gonna be over 7% very soon.
And so here's what that means:
A buyer that had a 20% down payment and had a $2,500 budget at the beginning of the year, at the lowest interest rates possible this year, they could have afforded a home at the $533,000 range.
Today, with interest rates, basically almost hitting 7%, that same buyer with 20% down and a $2,500 a month budget could only afford $378,000 mortgage.
That's a 29% drop in what they can afford to purchase.
Their buying power has diminished a lot. So for every seller in every price category, we're feeling this. And what it does is it puts pricing pressure into the market. The buyers just simply can't afford to pay more. Not because the house isn't worth it or anything else, it's simply affordability. And that's why you're seeing so many sellers kind of meeting the market. They're bringing their prices down, so that buyers can actually afford to purchase a home.
Now, that doesn't mean we have to go all the way down. A lot of buyers are adjusting their budget a little bit up too, but we've probably gotta find a middle ground here to meet those buyers where they are.
It's your call, but we've had the market home on the market now for 14 days or 21 days, and we're not getting the showings we need to get you an offer. So I want you to just sleep on that. I want you to think about it. And let's revisit this in the next day or so. And we talk about our next position in the marketplace."
That's the conversation to start having with your sellers if you want to get them to understand where the market's going.
Now, what's gonna go forward from where we're at today is it's likely that we're gonna see two more Fed hikes. This is the what's kind of getting baked into the equation of predicting 0.75% and 0.75% rate hikes again.
So these interest rates aren't going away. They're probably gonna rise even higher from where they're at. So, we want to get our sellers ahead of the curve and get sold now before these other rate hikes start to take place.
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