To Buy or Not to Buy? That is the Question..
are you willing, ready, and able?
Brent discusses whether or not it's a good time to buy in today's housing market.
More of a reader? Catch the video transcript below!
Yo! Today we’re going to be talking about why you’re taking a risk by waiting to jump into the market.
Should I wait until the market calms down to buy a house?
I know there’s a lot of volatility in the market right now. People are uncertain about their personal financial situation and the overall economic conditions. This uncertainty can paralyze us with fear and say, “you know what, we're just going to wait until things calm down a bit to buy a home.”
For some people, this might make sense. Of course, these things are unique to your exact situation; however, there are some risks if you are already willing and able to buy a house right now.
Here’s why jumping into the market now might be a better idea.
Firstly, we are seeing a lot of pent-up demand right now. I can’t tell you how many buyers that I have consultations with that are like, “Brent, I’m ready to buy a house but I’m gonna wait until interest rates change.”
There are a bunch of buyers that are thinking the same way, causing the demand to be very weak right now. But, what’s going to happen when the market calms down? You and everyone else on the sidelines are going to want to jump in at the same time.
When there’s a huge rush of demand in the market, we have the potential of seeing what happened during COVID. When the rates got really low, a bunch of people rushed into the market, and prices shot up.
As it stands right now, if you’re a buyer on the marketplace, you’re noticing that time on market is longer. Sellers are having to be a little more flexible with their negotiations. When you find yourself in a position where the market is not white-hot and houses are sitting on the market for weeks and sometimes even months, you have the opportunity to find a really motivated seller.
Now, this does not mean that every seller is going to cut their prices down or that every deal buyers see on the market is a killer deal - but what it does mean is that there is a good opportunity to find deals.
There are very few motivated sellers in a hot market. If you have ten buyers showing up writing you offers on the first weekend, it’s probably unlikely that a seller is going to be concerned about, you know, their ability to negotiate.
However, imagine you own a two-bedroom condo in a complex here in Mission Valley and there are 200 units in the complex. Let’s there are 8 for sale that are just like yours and everybody’s asking right around $600,000. If you’re looking around and everyone’s selling them for the same price and they’ve been on the market for 3 or 4 weeks, you know you want to figure out a way to differentiate your place from the other units.
If you’re super motivated to get out of your place right now, you might think, “maybe I’ll lower the price of my unit to get ahead of the curve and be competitive with the other units on the market.”
This is a fantastic opportunity for a buyer to get a great deal on a home.
Buyers have more negotiating power in today’s market.
Buyers today have a lot more leverage and negotiating power that they haven’t had in a long time. That power to negotiate could evaporate as quickly as the last market change.
I mean, these things change so quickly that to pretend like we can time the market perfectly is…let’s use the word naive. I think it’s naive to think we can time the market perfectly.
Here’s another example. Interest rates came off their June peaks by about mid-August. There was a two-week waiting period where rates got down into roughly the low fives (for context, right now we’re at 7%). What happened when rates were in the low fives for that two-week period? We got multiple offers, prices shot back up, and the median price in San Diego actually went up from August to September because of that two-week period where rates got lower for whatever reason.
We had a couple of listings that had been sitting on the market for a while. That two-week period came in August and boom! Suddenly those homes were flying off the shelves.
So, to reiterate my point, if you wait on the sidelines for rates to come back down, you’re gonna join the stampede and miss out on negotiating power and potentially getting a better deal.
Why shouldn’t I wait for interest rates to get lower?
Here’s the thing. When you buy a property, the price is fixed. It comes with an interest rate, but that rate is not fixed. You can change the interest rate.
The interest rate is only going to do one of three things:
It’s going to go up, in which case, you’ve locked in an interest rate that is lower than the market rate.
It’s going to stay the same - cool, no harm, no foul.
It’s going to go down, and you can refinance and lock in a lower rate.
When rates go back down, there’s going to be a stampede because of this pent-up demand.
If you stand on the sidelines, you’re going to miss out on some good deals.
However, imagine if you were able to negotiate a great deal with the seller today and then refinance to a lower rate in the future. You would get the best of both worlds: the low purchase price and the low interest rate (plus more variety in properties to choose from!).
Now, as we all know, there are already signs of an economic slowdown happening. With a recession looming, the Federal Reserve will likely lower rates again in the future, causing all the people on the sidelines to rush back into the market and drive prices back up.
What makes more sense for your situation?
I always say that everyone’s personal situation is different. What works for one potential buyer may not be the right financial move for another. If it makes sense for your long-term financial goals to buy a home sooner rather than later, I’d advise you to get ahead of the stampede.
Let everybody else sit on the sidelines and jump into the market now. Find a seller that’s really motivated and negotiate yourself a heck of a deal!
Pro Tip of the Day
The pro tip of the day is this: not every deal is going to be a great deal. Not every seller is going to be super motivated. Some properties, for whatever reason, are still going to get a level of activity that doesn't allow you to have a bunch of leverage when negotiating with a seller.
Now, this doesn't mean like turn on the computer and pick any house you want and it means it's a good deal; but what it does mean is the environment is ripe for there to be sellers that are motivated, and if you as a buyer are ready, willing, and able and you find a fantastic deal on a property, it could be very beneficial for you now to get ahead of the stampede that's for sure coming behind as soon as these rates get back down and affordability gets back in line.
So that's going to be it for me today guys! Don’t forget to subscribe to my YouTube channel for more videos and leave a comment if you found today’s topic interesting!
See you guys in the next one!
Brent Edwards (aka Brent the Broker) is a residential real estate agent and Realtor in San Diego, CA who helps clients buy and sell homes in San Diego, California and all surrounding areas. Brent is a highly-recommended Realtor in San Diego by family, friends and past clients. Call Brent today at 619-550-8070 if you have any questions about real estate in San Diego or you'd like to buy or sell a home.
