Who's Absurd Is More Absurd?

By
Real Estate Agent with Big Block Realty 858.232.8722 CA BRE# 01261476

Who's Absurd Is More Absurd?
The Cost Of Waiting

Earlier this week while onboarding a new buyer, she was sharing her plans with me to purchase a property here in San Diego, CA (America's Finest City) when she also warned me that while she wanted to start gathering information now, she wasn’t planning on buying till next year. I agreed it was smart for her to plan ahead, but asked her what was causing that delay? Here's how it went:

Thomas: "Was the delay over saving up for a down payment, a lease she was in, other?"

Buyer: "The interest rates, they’re too high today. Once they drop I can afford to buy."
Her reply was a common one the last 18 months, 

Thomas -I’m thinking to myself: "You're a first time buyer, and you've only decided it was time to buy earlier this year, so what rates could you possibly be comparing today's recently lowered rates to?"

 

 

Thomas: I probed, "You know, today’s rates are actually lower than they've been in a while - they actually dropped almost a point recently and they are quite low historically. In fact compared to when I bought my first house back when they were 12.9%, 7% is very reasonable."

Buyer, "Well when did you buy your house?"

Thomas "In 1989."

Buyer: "That's absurd, that was so long ago - it doesn’t really count as today's rates being lower."

Thomas: "Hmmm, Well what rate are you thinking about when you say 'today’s rates are too high'?

Buyer: "I'm only talking about a couple years ago when they used to be 3%."

Thomas: "Let me ask you this,  which absurd is greater? Both are historical and long gone! We are discussing rates from 34 years ago and from rates almost 2.5 years ago. Neither exist anymore. Today's rates do not offer any lower options unless of course you work with Jason E. Gordon at CMG where he'll help you with a very strategic 1 Year Rate Buy Down with CMG's money - not yours (shameless plug). Otherwise both rates are kinda equally absurd- that was the point I was making?"

Buyer: "Well my rate was way more recent than yours - that's why I was thinking it was a possibility of returning to 3%."

Thomas: "Think about what unique world events caused that 3% phenomenon. We likely would need to see something of that magnitude again, before we see rates below 4% ever again. The rates are moments in time. Now as we sit, is it feasible to see our 7% rate drop over time to 5% - yes - predicted by 2025. But, then you need to calculate the cost of waiting:"

Here's the math on a scenario that factors in the cost vs. the appreciation (cumulative gain) and amortization rate of owning now vs. waiting:

It's the difference of losing $43,716 or paying a little higher mortgage for 12 months and making $36,824 in the same time you're waiting to compete with more buyers, less inventory, higher prices, less negotiable sellers and higher PITI payments and possible PMI.

Who's Absurd Is More Absurd?
The one that waits to spend more money later (safe) vs. makes a calculated (bold) move now, to make more money!

 

Cover Image by Thomas Staub from Pixabay
 Infographics and info courtesy of Barry Habib, MBS Highway

Posted by


Thomas J. Nelson
REALTOR®, CRS, RCS-D, CDPE, e-Pro, Certified Military Home Specialist, Luxury Home Specialist, Author, Keynote Speaker and  Podcast Host 

Serving Coastal San Diego from Carlsbad to Coronado, Downtown, Balboa Park Area,
La Jolla/UCSD & Mission Bay Park Areas
I Offer Rebates to Veterans
& Active Duty

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Disclaimer:  Nothing in this blog article is to be construed as legal advice, tax advice, medical advice or financial advice.  For legal advice see an attorney.   For tax advice, health or financial advice see a tax attorney, certified public accountant, or other qualified professional.

Comments (10)

Jason E. Gordon
CMG Mortgage, San Diego, CA - San Diego, CA
Sr Loan Officer, CMA, CMPS, CDLP, CDRE, RCSD, CDPE

I wish more Agents would base their messaging on economics and mathematics (like you have don on this post Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets). Hopefully others will embrace the logic!

Nov 16, 2023 05:19 PM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
CEO of Vision Drive Realty - Coastal San Diego

Thank you my friend. Jason E. Gordon it's because of you I'm down the economics rabbit hole, between you, and your kind guidance to Brian Stevens and Barry Habib...it's opened my eyes.

Nov 16, 2023 05:26 PM
Paul S. Henderson, REALTOR®, CRS
Fathom Realty Washington LLC - Tacoma, WA
South Puget Sound Washington Agent/Broker!

Look Thomas; what happened to the interest rates for the people who thought 3% was too high and now they are 7 to 8% 🙄

Nov 16, 2023 08:21 PM
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Thomas. You got to have skin in the game to participate in the gain. Choose wisely. Enjoy your day.

Nov 17, 2023 04:35 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets

LOVE it! The quote of the week!

You got to have skin in the game
to participate in the gain. 

Nov 17, 2023 03:40 PM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

And did that new buyer decide not to wait?

Nov 17, 2023 04:51 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets

She's asked me to meet with her December 2, to re-evaluate what she can do know versus next Spring. So, TBD.

Nov 17, 2023 03:41 PM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

That buyer has an ostrich approach to owning and that won't get them anything but dirty hair and more frustration.

Nov 17, 2023 06:07 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

HI Thomas... by now, haven't we all heard a version of this. Of course, we are dealing with an entire generation of buyers who've never known rates above 5%. But you've left us hanging... did she finally get the "message?"

Nov 17, 2023 06:24 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets

Kinda sorta maybe ...She's asked me to meet with her December 2, to re-evaluate what she can do know versus next Spring. So, TBD.

Nov 17, 2023 03:42 PM
Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Thomas - those who want to buy and who are prepared seem to be buyers who become owners.  In the past, right now and likely in the future. 

Nov 17, 2023 06:59 AM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Prop. Mgr, Wenatchee, WA

Another factor to consider is the tax advantage of owning a home (via mortgage) vs renting. Put that into the equation, and it makes even more sense!

Nov 17, 2023 07:10 AM
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ
602-380-4886

Hi Thomas since I started in the biz in 87 I understand the 'psychology' of buyers 'thinking' it's a better economic choice to wait out the high rates. In fact, it never made good economic sense to 'wait it out' and not look for possible investing in a home for multiple reasons.  We had lots of work-a-rounds for buyers and sellers back in 'those' crazy high interest days.  Personally I made money investing in assumable mortgages and I thought anything under 10% was a 'go' all things being equal.

Perfect post for the times Thomas!

 

Featured in BananaTude!

 

Nov 17, 2023 09:02 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets

Thanks you Banana Anna! 😉

Nov 17, 2023 03:43 PM