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...
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...
Why do offers get rejected?
This is an important thing to listen to because we're out competing against other offers all the time now. It's almost always a multiple offer situation and your buyers want to know why they lose.
The first thing you have to realize is that about 21% of the buyers that are out there in the market are cash buyers. That's the latest stats from NAR. That's a little bit up from where it was a few months ago, but it's not like it's all the buyers. Only 21% of the buyers are cash buyers. So that means of 10 buyers, two might be cash buyers. Something to be aware of is that when you're competing with a cash buyer, it can put you at a disadvantage. But it's not the only thing that sellers are considering.
A recent study that was done by NAR found these were the biggest reasons why people's offers were rejected:
1. A low offer
They didn't offer enough compared to the competition. It was not because it was cash or not...
Here's some great language to use with buyers as they're entering the market today. We know it's a high demand, low supply market.
But how do we coach them through this process?
One way is by using the "Auction Analogy." You can do this by talking about a list price as being almost like a reserve price. So the conversation (which you can see below), will give you a good way to help buyers understand what's happening in the market dynamics. You can simply say:
"Hey, now that you're entering the market, I just want to kind of give you a little overview of what's happening in terms of pricing and where sellers are at. We're in a very low supply market and a very high demand market. So, on average, sellers are receiving a least four offers per home. Now some receive less, some receive more. But in general, we're going to be competing for a buyer for a seller's love. We're going to be competing with other buyers. So we want to come in...
Something interesting that you might find surprising that it relates to real estate, but fertility rates in the US have gone down dramatically over the last hundred years. In America today, we've actually had another 1% decrease.
We have the lowest birth rates than we've had in a hundred years.
Here are the numbers:
For every 1000 women in America aged between 15 and 44, there's 58.3 births. And you compare this to World War Two, when all the baby boomers were born, that number was more closer to 140 births! So huge difference in the numbers.
Now, how does this relate to real estate? I'm going to share with you now. Here is the the data today:
Looking at buyers who have children under the age of 18 in the home, the share of that group has declined from 58% in 1985, all the way down to 33% in 2020. So there's a much smaller group of people buying homes. It's actually the minority, not the majority, who have kids under 18 at home.
So you need to...
When a real estate market begins to change many buyers begin to question whether they should enter the real estate market or stay on the sidelines. After all many buyers can still remember the great recession and don't want to repeat the mistakes of their friends and family who purchased homes in the last days of the last great real estate peak.
Terry Rasmussen a top 1% Broker and team leader has 30 years of experience in the real estate industry. Having lived and worked through several upturns and downturns Terry has learned how to guide buyers with conversations centered on providing solid market based advice.
Watch and learn how to model Terry and help buyers make good decisions despite the market conditions.
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