Today's buyers are paralyzed by the on slaught of negative news coverage from both national media and online bloggers. "Fear and greed" is the dominant factor in buyer's psychology. Most buyers fear of overpaying or strive to steal any fairly-priced property. As real estate professionals and local market experts, we know better than anyone that national and state level housing condition might not reflect local market dynamics.

Here are a few things you can do to educate and inform your prospect buyers regarding the facts and basics of homeownership. First, help buyers understand that the ONLY right reasons to buy a home are based on actual NEEDS, such as marriage, new baby, children’s education, growing family, tax breaks and equity savings, etc.

Secondly, point it out the hazard of timing the market “bottom”. As a matter of fact, nobody can precisely predict the future price movements due to multiple variables that are beyond anyone’s control. Even buyers might get 10% drop in future home price, a mere 1% increase in mortgage rate can nullify that added affordability. Mortgage rates are known to be taking a roller coaster ride in a turbulent financial market like today’s. Since market sentiments could change so fast without getting noticed, buyers will find that they can be 3 to 6 months behind market “bottom” when they finally hear the media announce the “bottom”.

 

 

Finally, show buyers the waiting costs to become a homeowner with a “buy vs rent” analysis. Take buyer Jane for example, she rents a 2 bedroom apartment in Irvine, CA for $1800 per month; plans to buy a 3 bedroom condo at $520K, put 20% down and lock in 4.875% fixed rate. We make basic assumptions below,

 

Please note from 1975 Q1 to 1996 Q4 (prior to most rent boom), average annual home appreciation rate in California is 7.2% (data source: OFHEO).

 

Total housing expenses include principal & interest payment, property tax, mello roos, hoa due is $3162. After buying the house, she can take tax deductions of most interest costs and property tax total $26,036 (after offestting standard deductions). Deduct monthly tax refund amount is $412 and principal reduction of $523, the adjusted ownership cost is $2,227.

 

 

Now, let’s look at the top six reasons why buyers are better off with a home purchase:

Freedom, Stability, Payment Predictability, Tax Breaks, Equity Ownership, and Long-term Appreciation Gain.

 

 

The numbers show that over long-term, it costs A LOT LESS to be a homeowner than a renter. It costs about $1,716 per month to buyer Jane if she continue sitting on the fence. Many buyers should have bought a home in the early 2000s, but did not due to “fear and greed”. That is why we have pent-up demand now.

The missed opportunity and the hazard of market timing are VERY REAL to a lot of buyers this time around. They need YOUR expert advice, don’t let them fall prey to “Fear & Greed” psycho monster. No profession is better equipped than you are to guide your clients back to the right direction. Granted, we are not fortune tellers, thus we can’t guaranttee buyers short-term price stability. Homeownership, after all, is for long-term investment: the investments in the community, family and lasting relationships. These can’t be measured in dollars.

“For where your treasure is, there your heart will be also”

I have buyers thank me for helping them put their savings in new homes, thus avoid the stock market catastrophe. You can too help your buyers find home their hearts.

 

(Rent vs Buy analysis shown here can be finished within 10 minutes and shared with buyers immediately.  Assumptions and inputs can be changed easily to reflect different scenario.  Preview and comments on this tool is very much appreciated.)