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Buyers Waiting For Rock Bottom [Dear Ginny, WTH?]

“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!

Dear Ginny,

 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

Dear Anni,

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.

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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!

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Ginny is a 360 degree marketing specialist with over a decade of experience in real estate-related fields. She’s held senior level marketing positions at Alain Pinel Realtors and Prudential California, Nevada and Texas Realty. She left the corporate world in 2007 to start her own marketing communications company, Cain Communications. She markets to segments that matter using media that matters. Follow her on Twitter @ginnycain.

9 Comments

9 Comments

  1. Lisa Sanderson

    March 11, 2009 at 12:31 pm

    NARllyanna-ish. ROFL! Very clever!!

  2. Ben Goheen

    March 11, 2009 at 3:22 pm

    This very same topic was covered yesterday over at the Wallet Pop blog: https://www.walletpop.com/blog/2009/03/10/bad-real-estate-advice-from-tv-agents/

    In some markets, a 2.5% might not take very long in this economy. I’m also an appraiser, and a house I looked at yesterday had a fair market value from the County of about $480k while the appraisal was $286k. I’m not trying to start an argument about tax records because we all know how accurate they are. I’m just saying that it isn’t too far fetched that it’ll go down further.

    It’s true that timing the market is impossible – by the time you realize where the bottom was it’s already on the way back up. But, how many of us were saying this exact same thing 1-2 years ago?

  3. Matt Stigliano

    March 11, 2009 at 7:38 pm

    I read a brief blurb from Gary Keller about timing the market and I thought it was genius. He takes a piece of paper, tells a client he’s going to draw a line down a piece of paper. The line represents the market. When they think it has bottomed out, he wants them to tell him. As he draws the line, he watches their face and you can see the anticipation. Of course, by the time they say stop, he’s already heading back on the upswing or he hasn’t stopped going down. By the time we “time the market” we’ve usually missed the mark.

  4. Ashley Garner

    March 12, 2009 at 5:36 am

    Do you think your friend at Metrocities would share a copy of that spreadsheet with me? 🙂 I think that would be a great tool to illustrate the dynamic we are dealing with on a daily basis. Thanks! ASHLEY

  5. Anna Ruotolo

    March 18, 2009 at 8:46 pm

    G –
    thanks for the mention 🙂
    A

  6. Bridget Clark

    March 20, 2009 at 3:11 pm

    Great post – We have talked internally about catching the market at the bottom being similar to catching a falling knife. Dangerous game that sometimes seems like a better idea before trying to make the catch than after!

  7. Andrea

    April 6, 2009 at 8:25 pm

    When faced with this objection our sales agents do this simple demonstration with clients. They start drawing a downward sloping line and eventually slowly curve the line upward. While they are drawing the line they ask their clients to tell them to stop when the line hits the bottom. Invariably, the clients say stop after the line starts curving back up – because as everyone has already agreed- it’s impossible to predict the bottom and often when you get there you have already missed it.

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