I have received several calls over the past 2-weeks from seasoned (High Producing Agents) asking what is happening, is everyone seeing a drop-off in calls and activity?
Below is what I’m seeing and a couple of ideas that might help make your listing standout!
- Rates are at a 7 year high (BUT STILL HISTORICALLY LOW)
- Recent slowdown can attributed to time of year, recent increases in rates (approx.. 0.375% in the last 60 days) and increases in inventory
- Buyers have more selection and are being more careful in their decision making, taking their time and being aggressive in their offer/negotiations (price, credits, repairs, etc.) Something we haven’t seen in 5+ years.
- We are not getting a lot of push-back from buyers about rates/payments, but loans are less affordable than they were
- We expect that the 10 year Treasury will be trading between 3%-3.25% (this is what rates are most influenced by) for a while, mortgage rates be rang bound +/- 0.25%
- Regardless, rates are still at historic lows
- Economy doing very well, lowest unemployment in decades and solid wage growth, so people will feel confident in making that home purchase at some point
- Affordability still strong in most Southern CA real estate markets
- More room for appreciation in current cycle (assuming interest rates don’t go higher)
So the economy is doing very well which is bad for interest rates. Many believe rates should have been at the current levels a long time ago, but here we are. On the positive side, when people are doing well they buy houses. The housing market has evened out for buyers/sellers as well, were finally seeing buyers having some leverage in the negotiation process and sellers are being more realistic in prices (either upfront or through price reductions after their property sits on the market). With rates going up and inventory levels more than doubled since the beginning of the year the market should soften even further going into the “slow” season. Remind your clients rates are still at historic lows. Below are a couple of ideas that may help move your listing and save your sellers some money at the same time.
Listing Strategy #1 – Offer a rate buy down.
- IE in the listing description: “Seller will buy interest rate down by 0.25%”.
- The average cost for a 0.25% rate buy down is 1.0% of the loan amount.
- This is a great strategy to use for a property that is coming up on a need for a price reduction, and will cost significantly less. On a $700,000 property, say the loan amount is $560,000 that would cost the seller $5600. A price reduction in this price range would be at least double that, if not triple or even more.
- Not only will this attract buyers, but will be very appealing to the seller as well
- Great tool to present in a listing appointment
Listing Strategy #2 – Have your Loan Officer check your listings to see if they qualify for a CRA loan (Community Reinvestment Act)
- Based solely on geographic location
- This is a standard conventional loan, but on average rates are 0.50% lower and mortgage insurance coverage requirements are 25% vs 35%
- In many cases buyers shopping for $570k houses can now afford a $600k house
- Your listing will stand out from the rest as the house down the street may not qualify
- We can provide specific streets/neighborhoods that qualify for farming
- Attached is a flyer I use for these properties if you are interested call me to see if your listing is in a CRA local