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Some buyers have ventured out there, looked at a few homes, and withdrawn the enthusiasm to wait for a future date when interest rates fall.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