“Dear Ginny, WTH?” which is like a “Dear Abby” column for real estate objections. If you have a tough client or a marketing problem, “Dear Ginny, WTH?” is for you. Questions can be funny, they can be serious, it doesn’t matter, just ask!
I have buyers who keep saying to me they are waiting for prices to drop; they say they know the market hasn’t hit bottom yet. Ginny, what would you do?
Anni Hagfeldt, Alain Pinel Realtors, Pleasanton, CA
Confucius says that one generally doesn’t see the bottom of a market until it is in one’s rearview mirror. Well I don’t know if it was Confucius or not, but your buyers are trying to time the market. Here’s what I want you to say to your buyers: Hello McFly?
This IS the definitive buyer’s market. Short of sounding NARllyanna-ish, affordability is at its highest in decades. Interest rates are low. There are super incentive packages for first-time home buyers. Homes in many markets are selling at fire-sale rates. Short sales are the everything-old-is-new-again way to get a value.
The government is motivated to get the housing market kindled and is keeping the interest rates low. But, should the interest rates increase by even a quarter of a point, affordability can change exponentially; it’s not a linear relationship according to my friend Nate Hennings who has a degree in symbolic systems and a minor in economics from Stanford (and he’s a sommelier!!). Minor increases in the interest rate can quash affordability in less than an instant.
My BFF Anna Ruotolo at Metrocities Mortgage created a spreadsheet that shows the relationship between home values and mortgage rates. They calculate that if rates go up one quarter, it would take another 2.5% decrease in home values to offset the increase.
After all, even assuming a buyer could figure out the ideal time to buy – that is, when prices have hit not only hit a trough but are on the verge of rebounding – by the time they find the house they want, line up the financing and close the deal, the “best” time may be like that sinking feeling you get when you see flashing lights in the wake of your car.
Have a question you want answered in “Dear Ginny, WTH?” Email Ginny now!