Caveat Emptor – Latin for: “Don’t buy a house right now”
Sage advice indeed. Unless your circumstances warrant it and you’re ok parting with a few extra shekels you may never see again. Not to worry. Prospective buyers in most price ranges have largely backed away from the buffet table at this point. They haven't had much choice in the matter.
The purpose of my rant today.
The tide has turned, kind of…
It’s not a great time to buy or sell. Excluding those under duress without the luxury of a choice, or the ultra-wealthy paying cash.
For most, it hasn’t been the best time to buy for quite a while, but obviously a great time to sell throughout the “Covid-fueled, no inventory” seller’s bonanza we’ve witnessed over the last few years. (To be fair, proper vetting of purchase opportunities are subjective and contingent upon the specific needs, plans and circumstances of each individual consumer in the marketplace)
Hindsight 20/20, it appears the Fed left the punch bowl on the table for too long in an accommodating response to the pandemic. As a result, steep interest rates hikes invoked recently have prevented most buyers from pulling the trigger and even sacking deals already under contract. Large swaths of buying power have been incinerated in a matter of months.
New Sellers entering the market recently, are now dealing with the cheap money hangover symptoms that typically follow accelerated periods of relaxed monetary policy, compounded by the influence of Covid-19. The irrational exuberance that fueled an epic seller’s market over recent years has all but vanished, now leaving many of the remaining active sellers without a chair as the music stops.
Historically, we’ve seen interest rates at levels over 3 times what we now have. In this context, a prevailing rate of +/- 7% doesn’t seem all that bad. But not when that rate was in the 2’s only months ago!
In short, sellers are no longer in the driver’s seat, unless the price of their home is dramatically reduced to reflect the loss of buying power inflicted by recent interest rate hikes.
Depending upon their intentions and level of urgency, current sellers have the following options:
*Reduce the list price measurably to induce a sale given current market conditions
*Take the property off the market and stay put
*Re-list it in the spring, absorb the holding/opportunity costs of not selling now and potentially take a bigger haircut later
I’m currently working with buyers looking to purchase. (Yes, you read that correctly)
Personally, I would not be a buyer in this market but it’s not about me. It IS however, about me determining what is best for the client based upon their goals, objectives, and timeframes, along with every possible variable that may impact their decision making throughout this process. Full disclosure, they’ve been educated and informed on the choices they are entering. I have made them fully aware of the financial implications of the market in which they willingly participate. They accept these conditions, and we proceed.
* A home is listed for $825k
*Our lowball offer of $675k is swiftly denied (factoring in approx. $200k in renovations needed)
*Sellers counter at $799k
*Our response at $700k is rebuked and we are shown the door
*Fast forward a month, seller’s agent reaches back out to flirt at $775k
*We counter once again at $700k (again, factoring in approx. $200k in renovations needed) This hasn’t changed…
What has changed is the seller’s position in the market. Apparently, no one has informed her of this. Last I heard she’ll be taking it off the market this fall.
Fill the oil tank, it could be a cold winter.
Unfortunately, this winter could pale in comparison to the chilly market temps she may face in the spring if the Real Estate Cycle continues its historic pattern. But that’s another conversation…
Posted by Buddy Kane on