Only 16% of buyers believe it's a good time to buy a home today. That's according to a new study from Fannie Mae. So when we hear that number, it's kind of a shocking number and it's a record low. Let's not put any sugar on this. It's not good.
So when we're talking to our clients that may have thought about buying but are on the fence right now, how can we have just an honest conversation about the market today?
Well, I like this idea of a "then versus now" conversation. The "then versus now" conversation is dealing with real world numbers. And so let's assume you have a situation where you say, "Hey listen, I know you're kind of on the fence about buying right now, but I just wanna walk you through something to think about. If you were back in time six months ago when we started talking about buying, and you bought a house back then, let's just run through some numbers. I'm gonna compare that to where we're...
What is the picky inspection?
Now, for years we've been in a seller's market. And the last thing we wanted an inspector to do is to come in and kill the deal, right? But today the market is shifting towards buyers. And buyers are starting to gain more and more leverage in the marketplace.
So when I'm counseling my buyers, I might say, "You know, we wanna get an inspection. That's a fair inspection. But I'm kind of leaning towards advising my inspector to be a little bit more picky than they might have been in the past. Let me tell you why:
Because what we're doing when we do an inspection is really looking at health and safety issues and really big structural issues. You know, the roof is going bad, or there's a bad foundation, or something like that. The minor stuff, the things like just noting the age of a water heater and you know that there's a crack in the sidewalk and you know, the basic stuff, the cosmetic stuff is...
Is it a good time to buy a house today?
It's an important question for us as REALTORS to be able to answer and really be passionate about it. This isn't just an answer we're giving because we wanna sell a house, but an answer that's actually backed up by real data.
That way, buyers will actually believe what we're saying and be influenced by what we're saying.
So here are 5 key reasons, backed up by data, why people should be excited about entering the market today:
1. Rents are rising quickly.
So if you're not a homeowner, what are you by default? In most cases, you're a renter. So latest reading shows that rents are up 14.8% compared to a year ago. And they're likely to continue to rise at a fast pace going forward.
2. Interest rates.
Interest rates have settled back down a little bit. They're not at the peaks anymore. So interest rates historically, when you look at the last five decades, have averaged 8%. Right now, we're in the high...
Now here's another question that a lot of us are getting:
Is the market turning into a buyer's market?
This is really a market-by-market conversation. But I will tell you that we could easily have a situation in a lot of markets where you actually have a couple different markets within the larger market.
Here's what that means:
Markets aren't just one thing. They are a whole list of price bands, right? So you have lower tier price bands, mid tier price bands, and higher price bands. And in your market, as the market is transitioning, it's not all one thing. So you could have a lower tier price band that's still a strong sellers market. Lots of demand because that's where first time home buyers go, right?
But then as you move up the ladder, you might see that at the higher tiers—the luxury housing, for instance—that it is a buyer's market.
So what's the defining factor here?
You gotta ask yourself, how do I...
Why should a buyer buy a home in today's market?
If we don't know the answer to that, then it's gonna be a struggle to talk to buyers about why they should buy. Because everybody thinks they should wait:
"Shouldn't I wait for prices to come down? Shouldn't I wait for interest rates to come down? Shouldn't I wait for the recession to kind of come and go?"
There's gonna be a lot of those mindsets. And we have to be able to answer the question: "Why should I buy now?"
And really we have to sell ourselves first before we sell anyone else. So I'm gonna give you four reasons here that someone should consider buying now as opposed to waiting or not buying at all.
1. Some sellers are panicking.
Why are they panicking? Because they put their home on the market yesterday and they expected just to get overrun with buyers. Then maybe two or 3, 4, 5 days goes by and they still don't have multiple offers. They don't even have very many...
There's a new stat out that shows some unprecedented numbers. And the numbers reflect that home buyers entering the market today are paying 39.4% higher mortgage than they did last year at the same time.
Now, why would their mortgage go up almost 40%?
The number one reason?
Also a bit of home price increases as well. But by and large interest rates going up seven of the last eight weeks. They've gone up so fast.
So when we look at this, some of our buyers may be saying, "Hey, let's pump the brakes on me buying."
How do you respond to that? Well, the response should be a reflection on what happens if they don't pull the trigger now and they wait. We know the Fed is already planning to do six more rate hikes this year, starting right now in May.
So as we begin to roll through the rest of the year, it's highly likely these interest rates aren't gonna go lower. They're gonna go much, much higher as the Fed tries to break...
I had a real estate coaching student come to me recently and asked me if she should invest her equity of her home into other real estate.
And it's a question she was getting from her clients as well.
So I explained this to her in a story form, so she could explain it to her clients as well.
So let's assume that you had $400,000 in equity in your home. And you leave $200,000 equity in your home and you pull $200,000 out.
Now, how do I pull it out? I refinance it or I get a HELOC loan for that $200,000.
So now I have $200,000. Of course, I'm paying interest on it. It's not free money. Let's assume I'm paying 5.5% interest today.
With that 5.5% interest, I now have to beat that rate of return in order to make money.
So let's assume then I go out and I take that $200,000 and I find an investment property. Maybe it's a duplex or a triplex, and I spent $700,000 on it.
That's reasonable because they gotta put 25% down generally on investment...
Part of what we should be doing with our clients, especially our buyer clients, is educating them about the reality of the market.
Here's one example of that:
Did you know that right now in America, 48% of buyers are offering above list price by about 2.9%? So when we look at that on the average purchase price in America, which is about $357,000, it's roughly $10,000.
So 48% of the buyers in the market are offering over full price. That number being an average of $10,000.
Now that's an interesting bit of education we can share with buyers to help them understand what they're dealing with when they're out there in the marketplace.
Then you can pair that with another important piece of data, which is:
On average, buyers are gonna compete on a listing 68% of the time.
68% of the time buyers are gonna be competing with another buyer in the marketplace. Because of that, they've gotta be super competitive when they're bringing that offer in. And...
Hey guys, I wanna give you a quick strategy when you are listing a house for the first time and you're having a conversation with a seller.
I call it my "Many Buyer Eyes" Strategy. And here's how it works:
"Hey, you know what? One thing I do with all my sellers when I list their properties for sale is I treat you as a buyer. And what that means is that I'm gonna act like you're a buyer for your own property and your own price range. So I'm gonna set you up in the MLS as if you're a buyer looking in the 400-500k price range in your market area, in our MLS zone that we're in with similar attributes of your house. Here's why I'm doing this: I want you to see in real time the listings that are being presented to buyers that are searching for home like yours.
So you're gonna see all your competition, all the price reductions, all the pending transactions, they're gonna be coming to you. And I want you to look at them because we...
If you want a great marketing message that you can put out to your audiences today. I'm going to give you one right now.
And it's not from me. It actually comes from the NAR Economist Blog. If you haven't checked that out, check it out. I pull a lot of data out of there all the time.
But they had this great example of how much equity someone would have built up over a 30 year period.
And so they took an average home price and they went back 30 years ago and said, what was the average home price? What would be your guess?
The average home price 30 years ago was $103,333 — an odd number, but that's what it was.
Then they took somebody that put 10% down back then, had an average payment based on the interest rates at the time, and figured out how much equity they would have built up through equity appreciation and paying off their mortgage.
So what would they end up with net worth today just from their house?
The answer is...
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