WHY TODAY IS THE BEST BUYERS’ MARKET EVER
By Steve Harney
Even though the current real estate market may seem challenging for sellers, it’s a dream come true for buyers. Never before have home inventory levels been so high or mortgage rates so low. And while many real estate agents and mortgage companies are advertising to attract buyers, not everyone is listening. So if you have clients who have been waiting to purchase their first home or to move up into their dream house, you might want to stop procrastinating and take action now. Here are some reasons why buying a home today is one of the best decisions your clients can make.
Inventory is at record numbers
When inventory is low, it’s called a seller’s market because buyers have slim pickings and often have to engage in bidding wars with other buyers in order to get the home they want. But when inventory is high, as it is now, buyers feel like kids in a candy store. They can get any brand of candy they want, in any flavor they want and for virtually any price they want. In terms of real estate, high inventory levels mean that buyers don’t have to settle for less than they want or pay more than they can afford. So whether your clients want a simple, starter home or a dream house with extra features and deluxe upgrades, chances are high that your clients can find it now at a price that will make you both smile.
Interest rates are on the rise
Historically, the interest rates of today are extremely low. Back in the late 1980s and early 1990s, interest rates of 9 percent to 12 percent were common. But today, interest rates are substantially lower. With that said, though, make sure your clients are aware that interest rates are starting to creep up. So if they wait too long to take advantage of the great rates available, they may end up paying more than necessary for a home.
For example, a lot of sellers made the mistake of waiting for the market to peak before listing their home. However, many of them waited too long, and by the time they listed, the selling market had already started its decline, hence the high inventory. As a buyer, every day your clients wait to buy a home is another day for the interest rate to rise. So even if they wait for a seller to lower the price by $10,000, if they take a mortgage rate that’s a percent higher, the amount of money your clients save on the home’s asking price is meaningless because they’re paying more than that amount in financing fees.
Think about it. If you were to buy a car and only look at the monthly payments and not the overall cost of the car, people would say you were being naive. The finance fee definitely impacts the price of the car, just as it impacts the price of a home. So since prices are down, your clients should act now.
Real estate is a long-term investment
Very few people who bought property 20 years ago look back and say that they regret their purchase. However, almost everyone has heard a friend or family member say, “If I knew 20 years ago what I know now, I could have bought that piece of property for dirt cheap. That property today is worth over a million dollars. I wish I would have acted on it back then.”
The fact is real estate value goes up every year, even in a market that favors buyers. A new study by Jack Clark Frances, a finance and economics professor at Baruch college in New York City, and Yale’s Roger G. Ibbotson compared real estate investing from 1978 to 2004. They found that the average annual return on real estate was 8.6 percent. Their findings don’t take into consideration tax deductions and credits. So if your clients were to buy property today, it might not be worth much more five months from now. But five years from now they’ll have a good return on their investment, and seven to ten years from now that piece of property is going to practically double in value. So make sure that they don’t get caught up in short-term thinking. Tell them to buy now so they can have long-term gains.
A home is much more than a commodity
Thanks to all the home renovation and home flipping shows on the air these days, many people view real estate as nothing more than a commodity to be bought and sold. But prior to five years ago, the main reason people bought a home was for a lifestyle consideration. Maybe they wanted to be in a better school district or they wanted a bigger backyard. Whatever the reason, it was all about lifestyle.
Today, too many people are looking at real estate as something they can buy and sell like a stock. As such, they sacrifice location or home size or features they want. But don’t let your clients sacrifice an increase in lifestyle because they’re worried about overspending by a couple thousand dollars or worried that the great location they want won’ be so desirable to others. Whenever people don’t go with their dreams, they pay a price.
Remind your clients that purchasing a house is first and foremost a lifestyle decision. Yes, the financial aspect is there, as is the resale consideration, but those shouldn’t be the only factors. So as you show them homes, tell them to think of their kids, job, family and their personal likes more than anything else. That’s the only way they can be truly be happy with their decision.
Say hello to a good buy
Buying a home, whether it’s a buyer’s first house or one of many, is always an exciting time. These days, however, it’s more exciting than ever due to the current buyers’ market. So make sure your clients are taking advantage of what today offers. Get them the house they want at the price they want so they can enjoy the long-term gains. Remember, there’s no place like home … and that includes your client’s home.
STEVE HARNEY IS A 20-YEAR RESIDENTIAL REAL ESTATE AND MORTGAGE EXPERT WHO SPECIALIZES IN NEGOTIATION AND SALES TRAINING. HE AUTHORS A MONTHLY INFORMATIONAL SLIDE PRESENTATION FOR TOP AGENTS AND MANAGERS TITLED, “KEEPING CURRENT.” HE CAN BE REACHED AT 631.834.7000 OR VISIT WWW.STEVEHARNEY.COM.
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