"The hardest part is waiting," as Tom Petty once sang. Was he talking about prospective homeowners? I'm not sure, but after years of hovering around the high sixes, sevens, and even briefly the eights, it's almost time for people who have patiently waited for mortgage rates to finally start declining. The Federal Reserve has cut the prime lending rate by a half point, and inflation has started to moderate.
Almost all of the agents RISMedia contacted felt there are three primary reasons prospective homeowners should purchase now:
- No one knows for sure if/when rates will rise or fall. Buyers can always refinance.
- If rates do fall fast, competition for houses will skyrocket, along with prices.
- Start building equity now. Renting is money spent with no equity gain.
Though there's no assurance, there's a good probability this was the first of many cuts. Many people might prefer to hold off on investing till the rates continue to decline rather than making the quick decision. Who wouldn't want a 30-year fixed-rate loan at 4.5% as opposed to 6%, after all? In this situation, as a REALTOR®, you should explain why waiting is probably not the best course of action. While it makes sense for what goes up to come down, something can also remain down or go back up, and since inventory is still an issue, waiters risk losing out to those who move quickly.
Also, refinancing is an option even if rates do drop after a purchase. Therefore, now is the ideal moment to encourage your clients to buy by helping them find a property that suits their needs at a reduced price.
Lisa Reinecke, a realtor at RE/MAX in Brookfield, Wisconsin, says, "I tell clients that it's better to buy the right house for their needs now than to'settle' for something that may not work for them later." For instance, some of the houses we are seeing would be more of a lateral move for my buyers, who need more space; these buyers' primary demand is more square footage.
I walk them through the longer-term expenses of selling a house they might be willing to settle for now and weigh them against the short-term costs of possibly straining their budget, as well as the possibility of modifying their budget with an ARM loan. The low inventory in terms of pricing, location, and house amenities is another reason why I'm seeing buyers modify their expectations for their searches. Buyers are often reminded of the 80/10/10 rule by me. It's a good fit to think about if 80% of the house works for you, 10% you can change, and 10% you can live with. In a tight inventory market, I also tell them that they won't find anything that will satisfy every item on their list, so they need consider what they are willing to give up.
There is also the rationale to making a purchase now rather than waiting for even lower prices, when there will probably be much more competition.
"I understand their reasoning, but I also remind them that lower rates will probably result in increased competition among buyers in a market that is already very competitive," she says. In order to demonstrate that it is unlikely to shift to a balanced or buyer's market very soon, I inform purchasers in my initial buyer consultation about why the market is still a seller's market and the variables that are contributing to it, such as generational charts, the absence of new construction following the housing crisis, and buyer demographics. Despite the present rates, prices are predicted to rise further, and they may rise much faster if rates are lowered.
Above all, I ask them, 'Why wait?' While living in the appropriate home, they can refinance if rates do drop. Don't let interest rates prevent you from purchasing the ideal home. Imagine how fantastic it will feel to move into your new home and have your rates drop. Refinancing is a simpler process than engaging in bidding battles for exquisite residences.
In order to begin creating equity, Bonnie Beddall, authorized broker for RE/MAX Metro Realty and RE/MAX Eastside Brokers in Seattle, Washington, advises buying whenever possible rather than renting, regardless of mortgage rates.
She states, "Waiting could be more expensive than you think." Rent will increase if you are a renter attempting to purchase and waiting for rates to drop. You will still be responsible for paying rent. Having a home allows you to accumulate equity. Your purchasing power will decrease over time if you wait, as home prices in many places are still rising. Even though every scenario is unique, these are some things to consider and talk about with your local real estate expert.
We advise purchasers to concentrate on their "why." Most purchasers do not view a property as a commodity. People purchase goods for valid reasons. They can be downsizing, having a baby, or needing additional room because they have a deadline for getting their children into a new school. Buying a home is a difficult investment to time the market for, and nobody is an expert. A buyer's concerns over market swings become less significant if they have a well-defined "why."
Agent Eduin De Los Santos of RE/MAX City Square in East Meadow, New York, points out that nothing should prevent a potential buyer if the funds are in order.
He says, "When you are financially prepared is the best time to buy." "I understand that interest rates are high, but once they drop once more, home values will soar." I advise my clients to proceed if they are able to make the monthly payment at this time. Don't buy today, nevertheless, if they find it difficult to make their monthly payment. Similar to 2021, when rates start to decline again, there will be considerably more competition and homes will start selling for significantly more than list price.
"I advise customers that there's never a bad moment to buy. I try my best to inform them on the trends I observe, current housing prices, and interest rate developments. Instead of getting hung up on making predictions about the future, I attempt to educate people about what is happening now."
If you have questions regarding your current real estate situation, contact Chris. I will take the time to help you analyze the benefits for your personal housing decisions. I am always here to help.
by RIS Media
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