Opportunity Talk – 11/07/2022

Time for some opportunity talk. I’m hearing a lot of talk from buyers right now about waiting: waiting for prices to come down and waiting for interest rates to come down. While these are perfectly reasonable things to wait for, both of those concepts will bring a return of the competitive frenzy that we saw last spring, so why not talk about some opportunities that are out there right now?

WAITING FOR THE MARKET TO TURN

Waiting for the market to turn around makes some sense on the surface because buyers are always concerned about overpaying. They would rather buy at the bottom of the market. Of course! Who wouldn’t? But that’s just the problem. When the market hits the bottom and turns back around, we are going to be absolutely FLOODED with buyers. Remember last spring when every house was getting 8-10 offers and homes were selling for $50k-$100k over list price? That situation isn’t happening right now. Homes are sitting for longer, and most homes are not receiving multiple offers. We’re also seeing nearly as many price reductions as new listings on a weekly basis. There is opportunity out there for a buyer to capitalize on a slowing market BEFORE things turn around. Plus, sellers are now having to offer incentives to get their homes sold, which was absolutely unheard of last spring.

WAITING FOR INTEREST RATES TO COME DOWN

I get it. 7% interest rates are tough, and list prices are still high after the spring frenzy. However, North Bay home prices have come down 9% since the spring (see graph below), and I expect that will continue at least through the holidays. The good thing is that there are ways to mitigate high interest rates. Most lenders believe this hike in interest rates is temporary, and that as soon as inflation is stabilized – sometime within the next 6-18 months – rates will come back down. So, the big talk right now in the lending world is about a 2/1 or 3/2/1 buy-down. What this means is that the interest rate is temporarily “bought down” for a period of 2 or 3 years. In the case of a 2/1 buy-down, the rates are 2% lower the first year and 1% lower the second year. With a 3/2/1 buy-down, the rate is 3% lower the first, 2% lower the second, and 1% lower the third. Of course, neither of these products are free. The reason they work right now, though, is that sellers are having a hard time selling their houses, so they are being encouraged to offer incentives to buyers: Credits toward closing costs or paying for a rate buy-down.

North Bay Median Home Price Graph

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