It's a Terrible Time to Buy.... Unless

By
Real Estate Agent with Chuck Willman 9334967-SA00

As interest rates continue to dance to heights unseen in a very long time, many people have been sitting on the fence. They're waiting. Waiting until it seems safe to dip a toe in the water again.

Some sellers have put their homes on the market, watched them sit with little interest, and have pulled the home from the market, waiting for a more promising day.

Some buyers have ventured out there, looked at a few homes, and withdrawn the enthusiasm to wait for a future date when interest rates fall.

So, how can it be a good time to buy or sell? How long will this waiting game last?

That's a good question, and since none of us have a reliable crystal ball (well, unless I'm unaware.)

For some sellers, they have no choice. They have outgrown their current home. Or they've accepted a job transfer. They're stuck.

For others, they have cash. Financing is not an issue. With few competitors, they're jumping into the market and landing deals where they can find them.

So, is there opportunity in the current real estate market?

In one area there is. It's new homes.

There was a time when the new home market accounted just over 10% of home purchases. Now the percentage is approaching one third of the sales.

The Tricky Situation We're In

"Why aren't home prices coming down?" That's a good question. Tight Inventory is one culprit. 

Some feel we are headed for another 2008- a time in which home valuations crashed big time. It seems to me though that we're revisiting the 1980's. This was a time in which high interest rates prevailed but home prices sort of road a tiny little no-frills roller coaster.

So, why would new homes offer any remedy to the current buyer? Here are a few reasons:

  1. Builders tend to offer incentives. High interest rate? How about a "buy down". The builder contributes to buying down the interest rate to yesterday's rate. The builer I work with is contributing to paying for a "2/1 buydown" as well as paying for the title policy. This can allow the buyer to enjoy their home with a mortgage that can be around $1,000 lower per month in the first year. With the interest rate 2% below market the first year and 1% below market in the second year, the home owner can wait for a time to refinance when the rates fall. How do builders fund this? They tend to have relationships with lenders; builders also tend to have pockets deep enough to fund such deals. Also, they are in the business of selling- they must move inventory or face paying higer holding costs on inventory.
  2. Buyers are playing the odds- "Las Vegas" style. Since the inventory levels are low in most areas, there is pent-up demand. As soon as the interest rates begin to drop, it's possible (probable even?) that home prices will start to climb up again. I know, that seems crazy, aren't home prices too high already? Well, supply and demand is a real thing. So, some people are betting on a new price increase that will join a future interest rate decrease. So, if the builder wants to buy down your rate, that feels like a good hedge against future price hikes.
  3. For the same reason as the sellers who must sell, there are buyers who have outgrown their current home- Buyers are in the market whether they want to be or not. And, since renting does not build equity (except for the owner of the rental property) buying at any point will allow a home owner to build equity.

If you live in Utah, more specifically, Utah County- I'm happy to walk you through the process. Our builder has many homes that are a great solution.

Always wishing you well,

Chuck Willman

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Chuck Willman is a real estate consultant, agent, and industry writer who has helped thousands of people purchase homes over the past two decades. He resides in Utah County and has affiliates in all parts of the state.

Chuck Willman - 801.810.7770 - chuck@newhouseutah.com

Comments (16)

Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Chuck and thank you for the great information in your blog to share with buyers and people here in the Rain.  Make it a great day!

 

Oct 14, 2023 09:32 AM
Chuck Willman

Thanks for reading Will.

Oct 14, 2023 09:35 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

The higher interest rates have put a damper on the market, but with little inventory buyers must make the decision as to how long they want to wait and risk higher rates.

Oct 14, 2023 11:03 AM
Chuck Willman

"interest" rates, when high can contribute to disinterest (terrible pun, I know. But yes, so much is made of interest rates that too many are unaware of strategies that can make mortgages more palatable. It requires understanding a couple hoops that one could jump through.

Oct 14, 2023 12:15 PM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Hi Cheuck- you laid it out well for those who are thinking of buying. It's hard to try to "game" the market. The best thing to do is work with a knowledgable local agent!

Oct 14, 2023 12:13 PM
Chuck Willman

These types of post are usually harder for me because I don't want to come off as the guy with the tea leaves, making wacky predictions. However, there really are a few economic indicators to look at that make it less of a guessing game.

Oct 14, 2023 12:16 PM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Families on the move in your area will appreciate your local real estate reports.

Bill Salvatore Arizona Elite Properties

Oct 14, 2023 12:19 PM
Chuck Willman

Thanks Bill, nice words from an expert in my old stomping grounds 

Oct 14, 2023 06:34 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Chuck Willman it may not be the best of times to purchase a home, BUT it is going to get worst before it gets better.  Better to purchase now than to wait in my opinion.

Oct 14, 2023 02:32 PM
Chuck Willman

Though much of what is happening in the real estate market is national, Aly local market intelligence supersedes

Oct 14, 2023 06:35 PM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Oct 14, 2023 06:20 PM
Chuck Willman

Wow, I’m honored.

Oct 14, 2023 06:33 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good evening Chuck,

I'm with George Souto "it may not be the best of times to purchase a home, BUT it is going to get worst before it gets better!" Sitting in an apartment with rent increasing and helping your landlord build equity just doesn't sound like a smart move to me!

 

Oct 14, 2023 06:43 PM
Chuck Willman

How often have we looked  on a time as too expensive and later on  prices zoom right past.

Oct 14, 2023 06:53 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Oct 15, 2023 03:38 AM
Chuck Willman

Thinks Richard- thanks for the visit and comment.

Oct 16, 2023 01:01 PM
Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

It seems that those who wait on the fence often get a rude awakening when they finally are ready to pull the trigger and surely wish they had pulled the trigger sooner, haha.

Oct 15, 2023 05:25 AM
Chuck Willman

I wish we could predict the future, but yes, sometimes the market moves past us at higher pricing.

Oct 16, 2023 01:04 PM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
The Grit and Gratitude Agent

I bought my first home as a new construction home back in the 1980's when interest rates were 18%. Lucky for me I secured just over 11% interest rate.

Oct 15, 2023 06:28 AM
Chuck Willman

Memories of my first home, yes, higher interest than we have now. That home is now worth 400% more than what we spent. There's something about owning something with growing equity. If the area has population growth and low unemployment; it will most likely continue to grow in value at a pace greater than the national market.

Oct 16, 2023 01:06 PM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great post!  Thanks for sharing and enjoy your day!

Oct 15, 2023 06:44 AM
Chuck Willman

Thanks for the visit Kristin!

Oct 16, 2023 01:06 PM
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ
602-380-4886

Chuck seems like we gone down this road many times - those of us that have been in the business for years anyway.  And  homes did continue to sell because sellers need and buyers need one.  Life goes on.  And I agree.......sometimes in the past home builders offered awesome deals and our buyers loved it.  Our market is still moving along, homes are selling and there are a lot of cash buyers, some from high tax states, other needing a change in 'the lifestyle' shall we say.

Oct 15, 2023 03:30 PM
Chuck Willman

Yes, the cash element. So many cash buyers right now are taking advantage of the lull in price increases.

Oct 16, 2023 01:07 PM
Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate (435) 632-9374 - St. George, UT
St. George Utah Area Residential Sales Agent

Had several buyers back away when the interest rates climbed, Chuck and a few are waiting until they drop again. New construction is definitely a good option right now in this new market we're experiencing!

Oct 15, 2023 05:46 PM
Chuck Willman

Remember the buyers who sat out for a couple years only to discover the market had more than doubled in price? Utah. We seem to be so popular with regard to destination housing.

Oct 16, 2023 01:08 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

AND another reason to consider new homes is cheaper utility rates!  New homes are generally built to a newer building code, which means tighter building envelopes and thereby cheaper energy bills.  Check a builder to ask if they are sharing their HERS (Home Energy Rating Score) ratings?  If they are about 50-65, then they are pretty energy efficient!  

Oct 18, 2023 12:59 PM
Chuck Willman

So true! I remember this phenomena. Our first home in Arizona was older and small. We never could get the Kitchen and Master bedroom cool enough in the summer. Later on we had a home three times the size and our summer electrical costs were almost identical.

Oct 18, 2023 02:03 PM
Jim Paulson
Progressive Realty (Boise Idaho) www.Progressive-Realty.info - Boise, ID
Owner,Broker

Very timely post.  I just had the "I'm waiting for prices to drop further discussion" with a client at my open house last Sunday.  I said "You are welcome to your own thoughts and opinions, but just consider the number of people still moving to Boise from California, then add in all the ones from Portland and Seattle and think about what that demand will keep doing in Boise.  Then factor in the economic impact of Micron investing $15 BILLION into the Boise economy building their next generation memory chip fabrication plant here." They called their lender that day to see if they could qualify to buy that home.  Wish me luck.

Oct 26, 2023 12:47 PM
Chuck Willman

Posts like these are seldom "evergreen". Market conditions change all the time. For the time being, it appears prices locally are continuing to hold firm. Some cities, for instance- the one I live in, is actually currently going up in value despite the increasing interest rates. I suspect this local market is not that different from many other geographies that have low unemployment and large population influx.

Oct 26, 2023 01:29 PM