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When you hear that the Fed is coming out and saying that we’re near the end of rate hikes, you would imagine that buyers would rejoice and hit the market. However, our data indicates that our monthly supply of inventory has sky rocketed and this is a direct reflection of buyer demand.
There is a part of me that understands from the standpoint that buyers aren’t thinking that they’re getting in before rates get worse. It feels a little like the Nordstrom’s Anniversary Sale has passed and the excitement of the deal and back to school shopping has subsided. On the surface, it may not seem like an ideal time to buy for most people. However, not only are there solutions to these lackluster rates and market, now might be a great time to buy and here’s why:
- Buyer demand has plummeted. In the last month, our monthly supply, which is a direct indicator of buyer demand has sky rocketed. We have a couple of variables affecting this. First and foremost is the holidays and winter quarter. This is generally the slowest time for real estate. The last few winters have been outliers though because low interest rates aggressively drove the market into a wild market. Second, and also related to interest rates, the overall consensus is that it is unlikely for the Fed to increase rates anymore. This means that hypothetically, this is the worst that rates will be. Most importantly, because buyer demand has plummeted, there is little to no competition!! Unless something is priced to generate multiple offers, there is finally room to negotiate again!! Normal market, welcome back.
- However, I would argue that there is a solution for poor rates and that is Seller Credit Buy Downs. This means that you ask a seller to provide a credit to reduce your interest rate for a brief period of time. For example, in a recent transaction, the seller provided a credit that equated to just over 2% of the purchase price. With this credit, my clients were able to reduce their interest rate by 2% for the first year and 1% the following year. This may sound like a bit of a teaser rate, but there’s a strategy behind this. First, given that the expectation is for rates to come down, the hope is that you could refinance into a lower rate before your buy down expires. When you do exercise a refinance, the remaining funds in the seller credit are yours to keep!!
Between lower buyer demand, aka less competition and the ability to exercise seller credit buy downs, now might be a great time to capitalize on the concept of date the rate and marry the home. Behavioral economics becomes very evident when you know that the Fed is unlikely to continue “the pain” and not expected to increase rates anymore. Even still, it’s important to have conversations with your lender because there is a bit of a gap between the Fed and the actual rate you will get from your lender. For example, according to mortgage news daily, rates have actually come down by nearly half a point!! It’s been awhile since we last had a half a point decrease in mortgage rates.
Don’t be left on the sidelines. I’m here to help you put the puzzle pieces together to get into your dream home!!
