What's a Buyer and Seller to Do?
Last week our headline was "Mortgage Rates Approach 7%." The 7% rate as of Friday 9/11, has been exceeded. Mortgage News Daily reported the rate to be 7.12% for a fixed 30 year mortgage.
Speaking of 9/11, as this is the date I'm writing this, I recall like many of you that dark day 25 years ago where you were and what you were doing. My family was living in Scottsdale, and I had just arrived at my real estate office (Realty Executives) near Shea and 92nd St, when I pulled into the lot and parked. I was hearing the news report of a commercial jetliner hitting one of the Twin Towers at the World Trade Center. A jet? The Twin Towers? New York City? What a terrible accident. How could that happen, was my first thought. I backed out of the lot and headed home to resume this news story on TV at home, and as we learned, the news grew darker. And our lives changed that day.
25 years later, our nation is once again being hugely impacted with an enemy from the Middle East that seeks to destroy us and our way of life. Currently that's happening militarily and financially. The short term outlook for mortgage rate improvement does not look good. Most "experts" are beginning to view this as a longer term fight. The issue of course centers around housing affordability and as affordability worsens, both buyer and seller suffer the consequences.
For sellers to help their cause, they must offer financial incentives. They can:
- Lower their price
- Help buyers get a more affordable loan. (This can be accomplished with a short term or long term rate buydown)
- Offer a lease option to a buyer (this can be especially useful if the seller does not need to close now, but can wait 2 to 5 years to be cashed out)
- Offer lucrative terms to a buyer if they have an FHA or VA mortgage. These mortgages could carry rates as low as 2.5%
- Offer owner financing below market rates (this can happen if the owner/seller owns the home Free and Clear)
Door number 1 does not help the monthly payment situation for a buyer as much as #2 does. But in fact, both 1 and 2 may need to be implemented. We are now going on 4 years of sales and price stagnation. An aggressive and competitive approach may be what's necessary.
We are now going on 4 years of sales and price stagnation. An aggressive and competitive approach may be what's necessary.
For buyers, keep looking. The buyer's market is increasing. Be bold in your negotiations and don't be timid about asking for seller concessions. Many sellers would be VERY happy with an offer, even if it seems to be low.
Mike Bodeen has been analyzing the market and serving clients since 1976. This article first ran in Mike’s Monday Market Snapshot, the Bodeen Team weekly email.
