Best Time to Buy AND Best Time to Sell?
If you know a great real estate professional, you might be questioning them right now. They may tell a friend of yours
in the afternoon that this is a great time to buy a home and in the evening tell another friend that they have to lower their price in order to sell their home. Wait a minute. How can it be a great time to buy if prices are falling? Is the real estate agent just saying this to make a sale? Actually, the agent is 100% correct. Perhaps for the first time in American real estate history, you must buy now and you must sell now. How can this be? Because what is important to the buyer is different than what is important to the seller. Let us explain.
The most important thing to the seller: PRICE
Every seller is most concerned with trying to get the best price possible for their home. In order to do that, they must sell now. Banks repossessed the highest number of foreclosed homes in history last month. These houses will come to market at dramatically discounted prices. This is the main reason analysts are calling for another dip in prices over the next eighteen months. The best advice a seller can receive is to sell their home now before these foreclosures come to market.
The most important thing to the buyer: COST
Price plays a part in the buyer’s decision. However, the most important thing to most buyers is the cost – the mortgage payment they must pay every month. That payment is determined by the price of the home AND THE INTEREST RATE ON THE MORTGAGE. Rates are artificially low because of government intervention. That will not last forever.
The National Association of Realtors (NAR) has projected that rates will rise over the next seven quarters. What will that do to the cost? Here are NAR’s projections and what impact it will have on a $100,000 mortgage:
As we can see, the interest rate has a major impact on the COST of the home. Even if prices continue to fall, the cost may not go down if interest rates increase.
Bottom Line
Your real estate agent is trying to give the best advice they can to every family they work with – even if that advice seems to be counter intuitive.
5 Reasons to Use a Real Estate Professional
Should you spend the money on a real estate commission or save that money by selling your home by yourself? That is a question many home sellers ask themselves. Today, we want to discuss why it is crucial to have a true professional guiding you through the minefield of challenges that exist in the current real estate market.
The housing market today is more challenging than it has ever been and seems to be becoming more difficult each day. What impact will foreclosures have on prices? Which loan products that were available just last month are no longer available? How do you convince perspective purchasers to pull the trigger on an offer when everyone is telling them that they should see another 100 houses before they make a decision? These are tough questions for a trained, experienced professional. The lay person would find it almost impossible to keep abreast of this rapidly evolving industry.
1. Pricing Is Difficult
Just a few years ago, you didn’t have to worry about overpricing your home. If it was too high, all you needed to do was wait as historic appreciation was taking place. The situation is quite different today. With experts calling for another drop in home values, overpricing your property will cost you time. In this market, time costs you money. A professional real estate agent will discuss how increasing inventory could dramatically impact the value of your property in the months to come. They will help you set the right price in today’s market.
2. Negotiating Ability Is Crucial
Buyers today have an almost unlimited supply of homes from which to choose. They realize that puts them in a great negotiating position. Most buyers are now being represented by an agent. Sellers need to also be represented by a professional expert trained to negotiate real estate contracts.
3. Mortgaging Is Key to the Deal
The biggest impact of the housing market collapse is that lending standards are much stricter today than they were a few short years ago. Rules are constantly changing. Even FHA has gone through a guidelines overhaul in the last several months. You need a real estate expert who has teamed up with a knowledgeable mortgage professional to make sure that the buyer in the deal is in fact capable of obtaining a mortgage. Losing time with an unqualified buyer costs you money in a market where prices are falling.
4. Your Family’s Safety
We have always found it puzzling that the same person that will lock every door and window and set the alarm today will then allow total strangers into their house tomorrow. The real estate industry trains its practitioners to take steps to protect themselves and their clients. Take advantage of putting a person between you and the person calling on an ad or yard sign.
5. You Probably Have More Important Things to Do
Selling a home could turn into a full time job. Learning the necessary disclosures, coordinating the dates of your closings, dealing with a challenge regarding your appraisal and re-negotiating the offer after an engineer’s report are just a few of the concerns you may face. You would probably be better off spending that time with the items important to you and your family and leaving the challenges to your agent.
Bottom Line
To make sure the sale of your home is handled professionally – hire a trained professional. In the long run, you will wind-up with more money in your pocket and have fewer challenges with the move.
Can Rates Go Down Any More?
It appears they CAN and that they WILL. The buzzwords today are Quantitative Easing. It is another of the weapons the Fed has at its disposal to impact the economy, as a whole, and interest rates in particular.
Let me explain. In so far as the Fed has already lowered the rates they charge to lending institutions as much as they can, and they still see a sluggish economy with weak employment numbers and growth, the Fed appears ready to enter a second round of Quantitative Easing (QE). QE is when the Fed begins to buy Mortgage Backed Securities in earnest. They do that by paying more that the market price for MBSs; therefore, pushing interest rates lower.
But why do it? I mean rates are historically low already. Is lowering rates another quarter or half percent going to get someone to buy a house that hasn’t already gotten off the fence? Maybe, but I can’t see the number of people deciding to buy at 4% rates being that significant as compared to those looking to buy at 4.5%. There HAS to be other reasons. Maybe….
- The Fed realizes that lower rates will stabilize home prices. Lower rates mean borrowers can borrow more money based on their income, enabling them to pay more for a home which can slow the decline of prices, stabilize prices, and in a few areas even raise prices of homes.
- The Fed needs to look like they are doing SOMETHING to energize the economy or get consumer confidence turned around.
- The Fed has an agenda other than lower mortgage rates. Maybe the Fed is using the lowering of rates, in an effort to devalue the US Dollar abroad. By lowering the value of the dollar, our products become a better bargain to buyers overseas. So, maybe, just maybe, this is actually an attempt to kick start the economy. If we sell more products overseas, we need to produce more products, hire more employees to make, sell, and distribute those products. Can I smell job growth through QE?
Understand that a weakened dollar will eventually force rates to move up (to re- strengthen the dollar); so, there is going to be a window of even more incredible mortgage rates, but, the window will need to be carefully watched because it can’t be left open forever.
There is no history we can point to predict if QE can or will work. Nor is there any real indication of the level of aggressiveness the Fed will take in this area. (Listen to the rhetoric between now and next week’s release of the Fed’s Beige Book as hints.) It may just be another shot in the dark, but personally, I am in favor of ideas that promote job growth more than government hand outs and bail outs.
The Big Picture and You
I learned long ago that being steeped in the business of real estate does not necessarily translate into grasping the big picture. So I made a commitment to digging beneath the surface and understanding the critical interactions that drive the real estate market. As I did so, I realized how hungry my clients were for solid information.
I’ve never lost my fascination for the facts behind the headlines, and today, I believe that Keller Williams Realty’s sharp focus on research is central to what sets us apart as a company.
Nearly every client enters into a conversation about buying or selling a home with a lot of preconceived notions and anecdotal information. It’s our job to be knowledgeable of the actual facts and to step up as the local economist of choice. That’s what our clients are looking to us for, and it’s the basis for the trust they place in us.
But having walked several miles in your shoes, we recognize that in-depth research probably doesn’t fall in your “20 percent.” In fact, most agents aren’t trained to conduct the kind of analysis that the KW Research team is known for. So this year, we’ve compiled the results of our most recent research studies into the KW Market Navigator: Vision and Opportunities.
It’s filled with facts, stats and perspectives (see the example below or click here for a sneak peek) that you can draw from on a daily basis. And believe it or not, it’s fun to read.
Of course any observations on my part concerning the importance of research and market statistics would not be complete without my overriding perspective on the topic: The market determines the number of people who will be successful, not which ones. You get to decide if you’ll be one.
Terrie Fink And Associates 