Hey guys, what if I told you that today may be a better time to sell your home than even last year when rates were 4%?
Let me give you the data (and a script you can use):
“According to the National Association of REALTORS, home prices are now only $4,000 away from their all time high last June, and we are at 11% less inventory than we were at that time.
The other great thing that is happening in this market is that sellers are now back to getting 100% of our asking price on average in our market. And get this: 37% of sellers are selling for over full price.
So this is a market that is a great market for sellers in most price bands. If you're thinking about selling, I'd love to chat with you. I'd love to have you send me a text or a quick call.
Let's talk about what it might look like for you to put your home on the market.”
That's the script I want you to use. That's the script I want you to put out because...
Hey guys, in real estate, we often hear the word "affordability". What does it mean and how can we break it down for our clients? Affordability has three components.
The first one is how much people are making. In the last year, on average, wages have gone up a little over 7%. So people are making a little bit more, which means they can afford a little bit more in their house.
The second leg of this is housing prices. Housing prices have flattened out compared to what we were seeing in 2019 and 2020, and in some markets, we're seeing some declines. Last quarter, home prices decreased by about 4%, which is significantly less than the double-digit gains we have seen in previous years.
The last component is interest rates. Interest rates are having the biggest impact on affordability. But it is important to remember that when buying a home, home prices are permanent, but interest rates and wages are temporary. As wages generally...
Hey guys, we've got some good news regarding the real estate market, and that is Fannie Mae does a study, it's a purchase sentiment study. They do it every single month. And finally it's broken the downward trend.
All the way since back in February of 2022, there's just been this downward trend with sentiment among buyers and sellers about the market, about buying, about selling. And it really hit a low point here in the last couple months, but it's broken. Now it's starting to come back up.
Buyers and sellers are now seeing a little bit of a rainbow at the end of the tunnel here. They're saying the worst is behind us, and it's starting to look a little bit better.
So this is good news for us. We're gonna combine that with another piece of good news, which is affordability.
So affordability over the last couple of months has gotten way better. We had an interest rate peak, and now it's come down, down, down, down, down, and it's...
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's the number one reason somebody should be buying a home now as opposed to waiting?
Number one reason is this:
Lawrence Yun, chief economist for NAR at a recent conference said this. He said that it's totally within the realm of possibility that we'll see interest rates at eight and a half percent interest next year in 2023.
Why? We know the Fed has already announced they're gonna do another rate increase in November and another one after that, then they're gonna take a pause. So two more increases are coming and we're already at 7%, eight and a half, maybe a low estimate. So when, although we feel like the interest rate is high, it's not high relative to history. Remember the average interest rate over the last 50 years has been 8%. We're at 7%. So when we look at it from a historical standpoint, it's not as high as we perceive it.
We perceive it to be high because we're basing it on the 60 year low. We just live to...
News from NAR (National Association Realtors) came out recently and they said that home sales are down 23.8%. But strangely, home prices are up 8.4%. So where's the conflict there? How are we having these crazy numbers?
Well, here's the reality — there's two reasons for it:
One is that we are still benefiting from appreciation that happened at the beginning of the year when interest rates were close to 3%.
And the second reason?
We're benefiting from low supply. We still are at a historically low supply, about 3.3 months of supply. Meaning if every REALTOR stopped working today, it would take 3.3 months of time for us to sell out that inventory.
So what's a healthy balance market? A healthy balance market is about six months of supply.
By the way, I want you to get this in your mind. It's completely different than the Great Recession. We entered the great recession with 11 months of supply. Strong buyer's market. We are...
Would it be crazy to buy a house now?
This is a question that people are gonna ask you. I've heard this question come up a few times just in my social circles.
I'm gonna tell you there's two key reasons why it's a great time to buy a house. Not just a good time, but a great time to buy a house.
1. You have more buying power than you've ever had in the last 10 years.
Think about the last year. Just last year, if you were gonna go buy a house, you're competing with 10 other buyers, you're always gonna be in a multiple opera situation. You're gonna have to come in with non-refundable more money, go over full price, have an appraisal gap language, remove inspections before you've even done an inspection. You were at such a disadvantage as a buyer.
Let's contrast that with today:
When you come in as a buyer, first of all, sellers are reducing their prices en masse. Plus, they're gonna reduce their price again, when you make an...
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...
Now, this is happening a lot:
Buyers are getting skittish about interest rates, especially when they're in the middle of a transaction and their interest rates floated up because they didn't lock in the beginning.
See, a lot of buyers are gamblers. And they're optimists. So when they come into the transaction, they don't necessarily lock right out of the gate and they're gambling that the interest rates will come back down or float back down. But that gamble has not been a good gamble for the last several months.
And so interest has climbed, climbed, climbed. But if you do have that situation where you have a buyer that's had an interest rate that went beyond what they were expecting, it can create a mid-transaction negotiation.
So what you can do is you can come back to the other side and say, "Hey, we have a buyer that was completely excited about buying your house. Unfortunately, interest rates have kind of gone...
30 years ago, when I entered the real estate business, we used to see a clause, and I used to use this all the time myself, that we would build into offers.
And the clause said something to this effect:
"This offer is subject to the buyer qualifying for a loan and the home qualifying for a loan as noted in the offer terms. And you could say the loan type (conventional, FHA VA, whatever you're gonna do there) at an interest rate not to exceed X."
And that was the key part of that language. And I'm not suggesting you use that language exactly, that's something for you to talk about with your broker. But we would just have an interest rate cap built into our offers.
Now, some people would say, Well Jim, when I have my buyers get qualified, they generally lock themselves in. Not every buyer locks themselves in. A lot of buyers like to try to gamble and float it.
So when we build that language in, it gives the buyer an...
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