By Rich Levin
Flurries
This time of year and this year (2012) in particular there will be a period of days or weeks when suddenly lots of houses will sell. For no apparent reason, it may be good weather, a news story, mortgage interest rate change or the phases of the moon, we never know why suddenly a flurry of houses sell. It may happen in just one price range, just one suburb or part of town. The people who have their houses for sale benefit. Often there are competitive offers driving the prices higher. Sometimes a house that had no activity for weeks suddenly has an offer.
This year in particular with the election news, the European economy news, the stock market fluctuations, and all of this occurring with years of pent up demand from Buyers who have been on the sidelines make it an even more volatile year. A year when you or someone selling their home does not want to be off the market when a flurry hits because it might be the best one of the year, or the last one.
Raining Money
Shockingly, interest rates continue to be at all time lows. In March, as there were signs of health in the economy, mortgage interest rates bumped up over 4% with rumors of rising quickly to 5% or 6%. Then news of the healthy economy ended and rates dropped back to below 4% in many areas. This was a clear sign that as soon as there is health or just optimism in the economy mortgage rates would quickly, immediately rise.
Maybe that is the cause of the flurries, Buyers are realizing that this time of historically low rates will end and when it does those who didn’t buy at today’s low rates will wish they did for two big reasons.
Two BIG Reasons
Consider this, a 1% rise in interest rates, for example from 4% to 5%, lowers the amount that a Buyer can borrow by 12%. That means that someone who could afford a $200,000 mortgage at 4% could only afford $177,000 at 5%. That means they would have to buy less bedrooms, less baths, smaller square footage and/or a completely different neighborhood. And, once rates start to rise there will be no window of opportunity to go back and get the lower rate.
And consider this, in the historically hot markets, California, Cambridge, Mass., parts of Florida, New York City and many others foreign investors are buying up residential Real Estate. Why? Because they anticipate that there is going to be an inflationary bump as there was in the mid 1980’s when the value of everything including Real Estate rose by 50% to 100% in just a few years. When that occurred the owners of Real Estate benefited and the tenants simply suffered higher rents as housing affordability moved further from them.
Raining Houses AND Money
This is a unique moment in time. It is usually a good time for Buyers, a Buyer’s market when inventory of homes for sale is high driving prices lower. Or it is a Seller’s market when there are lots of Buyers and a lower inventory of homes for sale driving prices higher. It is never a good time for both Buyers and Sellers. (I guess it’s not never but it is rare.) That is what is happening right now. For Sellers prices are stable, and in the flurry areas prices are rising. For Buyers, this is a window of low rates, reasonable prices, and possibly a window of a pre-inflation bottom of the market.
Full Disclosure
Yes, I work with and for Real Estate Agents and Brokers all over the United States so I have some “skin in the game.” And yes, I am guilty of seeing the glass half full. I look for opportunity instead of problems. But, I just helped my younger son buy his first house. I’m working to help my other son buy his first house. We are selling and buying. So, full disclosure me and my Clients, who are successful Real Estate Agents benefit when people buy and sell. At the same time I am walking the walk. Talk that walk with me. You will be glad you did, happier and wealthier for it. Call a competent Agent right now to discuss your move or to help your son, daughter or loved one take advantage. It’s raining houses and money.
Rich Levin is a coach whose Clients achieve extraordinary success. You can experience Rich’s work for free weekday mornings by going to www.FreeCoachingWebinars.com and click on “Free Registration.” You will gain access to Rich’s daily 15 minute coaching webinars (8:45 a.m. EST). If you would like to discuss hiring Rich as your personal coach or having him speak at your next event, contact him at 585-244-2700 or Rich@RichLevin.com.