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Week of November 20th-26th
Property Tips and Tricks
A few immutable laws of real estate
Although the real estate market changes over time, and there are a multitude of submarkets that can each behave differently from one another, below are several universal tips applicable across all markets, regardless of the prevailing conditions.
People don't want to sell to or buy from jerks..kindness is profitable
Selling isn't just about the transaction; it's about forming connections. When communicating with the other side of a deal, take time to understand and appreciate either what they've created (if they are a seller) or where they are coming from (if they are a buyer). For a buyer, the stronger the relationship between buyer and seller, the greater the chance of negotiating better prices and/or terms during a transaction. The same goes for the agent or broker you are working with; having representation who understands and has a relationship with the agent or broker on the other side of a deal can pay off.
My price and your terms or your price and my terms
Keep in mind there can be various ways to structure a deal and the person on each side of the transaction has a motivation to transact but also has certain deal points they may be flexible on. Many deals can be more workable if both sides are willing to entertain a bit of creativity.
The profit starts with the purchase, not the sale
While it's crucial not to overspend on a purchase, buying a home involves more than just financial aspects; it's often a family decision as well as a quality of life decision. Various factors weigh in when deciding the worth of a property. With that said, setting a predefined maximum value at the onset of negotiations can help you gauge when it makes financial sense to continue negotiations or walk away.
Rejecting an excessively high offer is like agreeing to pay an overly high price.
"If someone offers you $500 for your socks and you decline, you've essentially chosen to pay $500 for your socks."
Occasionally, you might receive a lucrative offer for a property you own. If the offered price isn't something you'd pay yourself and if you have more profitable uses for that capital, consider accepting it.
Real Estate News
Macro market update - unusual landscape
In a landscape of fluctuating mortgage rates and evolving housing market dynamics, the United States is witnessing strange times in real estate. Recent data reveals that existing home sales have plunged to a 13-year low, while mortgage demand has surged to a six-week high. The catalyst behind this surge in mortgage demand? Plummeting interest rates...in general, data suggests that people are more impacted by rate changes than the overall interest rate when it comes to mortgage demand. If the mortgage interest rate suddenly falls, as it has done recently, mortgage demand spikes. When the rates rise, mortgage demand drops.
Speaking of mortgages, roughly 22% of homeowners have a mortgage rate below 3%, a stark contrast to the meager 1% of homeowners recorded back in 2019. This is a reminder as to why many people do not want to sell currently.
The average mortgage rate across the country stands at 3.6%. It's important to note that a significant 40% of homes are owned outright without any mortgage obligations.
In 2021, the median new mortgage payment hovered around $1,500 per month. Fast forward to the present, and that figure has hit a record-breaking $3,000 per month, highlighting a steady climb as mortgage rates recently spiked to 8%.
Currently, 35% of real estate transactions are now conducted in cash, marking the highest share seen in nearly a decade. Elevated mortgage rates have rendered cash purchases more appealing; the number of mortgage-free single-family homes and condos has increased by 7.9 million from 2012-2022, reaching a total of 33.3 million.
Economist Mark Zandi explained recently that the economy seems less sensitive to interest rate fluctuations compared to previous times. This resilience could be attributed to households wisely securing record-low fixed rates, with merely 10% of household debts linked to rates that adjust within a year of market rate changes—a stark decline from the 35% recorded in the early 1980s. Simply put, more people back then had adjustable rate mortgages compared to today.
For sellers, although there's a smaller pool of buyers in today's market, prices remain higher due to constrained supply. It's not the time to be overly ambitious, but there are still profitable sales to be made.
As for buyers, having cash reserves and maintaining flexibility places you in an advantageous position, especially amidst reduced market competition.
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Jonathan Balog
DRE# 01980970
Broker
M: 831.747.0310
[email protected]
Compass is a real estate broker licensed by the State of California operating under multiple entities. License Numbers 01991628, 1527235, 1527365, 1356742, 1443761, 1997075, 1935359, 1961027, 1842987, 1869607, 1866771, 1527205, 1079009, 1272467. All material is intended for informational purposes only and is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to the accuracy of any description or measurements (including square footage). This is not intended to solicit property already listed. No financial or legal advice provided. Equal Housing Opportunity. Photos may be virtually staged or digitally enhanced and may not reflect actual property conditions.
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