No matter where I go, the question on everyone’s mind lately is not just “How’s the market?” but “Is this a bubble?”
The short answer? No, it’s not a bubble.
Then what the #%(@ is going on?? Well, that answer is not so short. In the past couple of years, a whole new generation of homebuyers have dropped into the market. After the mortgage crash that happened 15 or so years ago, building seriously slowed (No one was buying, many builders got into bad financial positions… so, why bother building?), leaving us with simply not as many homes as buyers.
On top of the home shortage, and all the new buyers, we have extraordinarily low mortgage interest rates, so borrowing money is simply “cheaper” than it is in a normal market.
All of these things combine to form this unprecedented (yes, I am as sick of that word as you are) market. For sellers, there are a lot of benefits, for sure. While we have started to see a bit of a shift, things are still quite competitive. We may not be seeing as many 25 offer situations, but we’re still seeing plenty of five or ten offer situations.
Along with those multiple offers, we’re seeing buyers trying to do all they can to make their offer the best- from waiving inspections, or portions of inspections, waiving appraisals, paying well above asking price, offering free “rent back” to the sellers, and so much more. Who, when you’re selling, doesn’t love getting an offer that basically lets you write your own ticket?
But what if you’re a buyer? Should you “just wait?”
This market can indeed be a bear if you’re looking to buy, and I totally understand your frustration. Many buyers are writing offer after offer and losing the battle. It’s exhausting, and I know it can make you want to throw in the towel.
But wait? Hold up.
Here’s why:
Date Avg Home Rates Payment
Sept 2018 $262,000 4.63% $1361
Sept 2020 $290,000 2.89% $1247.75
Waiting for a normal market could cost you. Right now, there is simply not enough supply, but all signs point to that leveling off to a degree. For the market to “cool,” it will most certainly be because rates have gone up to a “normal” range. Unlikely that an uptick in rates is going to drastically impact prices overall, so that lands us back at somewhere in the neighborhood of a rate of 4.63% in a normal market, and that same home you’ve been eyeing at $320,000 would now be $1600 per month rather than $1350. Not an insignificant difference.
But with the rates as they are now, hovering right around 3%, you can actually go over that asking price, even by $30,000, for only an additional $125 or so in your payment.
Still better per payment than what you’re likely to get when waiting.
Yes, it’s not quite that simple, but if I got into all the details, I’d surely have lost you by now.
If you’re still reading, maybe you have questions?
Reach out and let’s talk!
