As experts say, we’re in year three of what is probably a 5 year down cycle in real estate, after basically 10 years of the largest growth we’ve ever seen. So, we all got high on the hog, and now are paying for our sins, right?
You know what? I honestly don’t know. I know how to sell real estate. I know how to speak on the subject. I know how to coach agents to be more successful. I even know how to teach you to handle objections with ease.
What I don’t know is economics. And, most likely, neither do you.
I got some great advice from a guy named Paul Edgell from CTX Mortgage in New Jersey when I was first starting out in real estate. He told me to remember that I sell real estate, and people like him sell mortgages.
Ooooo, Paul. So very profound!
Actually it was.
In the beginning of my career, I worked mostly with buyers. Do you how many of them asked me about mortgages? How much do you think I could qualify for? What about this program? What if I went in with 5% down instead of 20%? Every potential buyer had a question about mortgages. And, most of my colleagues would get caught up answering those questions of their potential buyers.
Why? That’s like a mortgage person telling a seller how much to list for. It’s not your bag.
So, with that lead up, I will tell you that from what I hear, the bailout will ultimately help the real estate market. However, I doubt anyone will see the theorized effects of houses moving and prices going up anytime in at least the next 12 months.
However, in the meantime, interest rates could very well go up. That means that while someone wants to wait for prices to go up so they can get more for their house, they will only be able to buy less house by comparison than they could today.
Let me explain: Let’s say you sell today for $300,000 and owe $100,000. You buy a house for $400,000, putting roughly $200,000 down and financing $200,000 at 6%. That’s about $1200 a month without tax and insurance.
Now, what if you waited until the prices went up, but the rates went up too? So, let’s say you get $325,000 for your house, and the other house costs $425,000. You’d have roughly $225,000 to put down now, keeping your mortgage at $200,000. BUT…at 7%, you know must pay $1,320 a month for principal and interest only (on a 30 year conventional loan).
Effectively, you get less house for your money. To keep the same $1,200 a month, you’d now have to buy a house that was about $20,000 lower than the one you wanted.
In other words, people who wait for prices to go up to sell, may find that they can’t afford the type of house they would want, and may have to settle for less, if rates go up.
Now, I don’t know that rates will go up, but they could. This past summer, they were up almost a full point higher than they are now, so it’s not inconceivable that rates move a point in a year. Who the heck knows?
The point is that NOW is always the best time to buy or sell real estate. Conditions can always change for the worse. Hoping they get better is a risk, like gambling. You just never know.
Why am I telling you this? First, I want you to think on your feet. Buyers and sellers will likely be telling you they want to wait until after the election, or to see the effects of the bailout. So knowing how that might hurt them is good in terms of helping them make the right decision for themselves.
Also, however, I want you to realize that A) houses are selling every single day, despite what’s going on (and, contrary to what you may be thinking, they’re not all short sales!), and B) it’s always something.
It’s always something.
According to the media, it’s never a good time to buy or sell real estate. The market’s too high, don’t buy. The market’s to low, don’t sell. Etc., etc. But it’s more than that. There is always something that gets in your way, if you let it.
From around 1990 to 1994, the real estate market was horrible, and interest rates were in the teens!! But still, people were buying and selling every day.
From 1999-2004 the market was experiencing the highest growth it had seen ever. Interest rates were down, people were buying and selling like crazy. Property flips were happening all over the place. Yet according to the media, it was a horrible time to buy real estate because prices were too high.
In 2000, it was the stock market crash. And guess what? Real estate went up instead of down, as predicted.
On September 11, 2001, I was making lead generation calls and was actually told about the first crash into the first tower from an expired listing that I just called. “Have you seen what’s on the TV?…” Of course, I stopped calling people that day. And while I continue to pray for the people who died, their families, and our troops overseas, the next day it was business as usual all around the country. People listed and bought and sold their homes on September 12th, 2001. And 4Q 2001 was part of the continued upswing of the huge growth from 1998-2004.
Also, around 2003 there was the Do Not Call List, which scared the pants of off agents; it gave them another reason not to call potential clients. Guess what? That didn’t stop millions of people from buying or selling, nor thousands of agents from calling anyway. And many innovative door-knocking agents did a lot of business as well.
There’s always going to be something.
So, get out of your own head and look at your local MLS hot sheet. I bet there’s a ton of new listings, a bunch of under contracts/pendings, and a lot of closings today.
There always are.