Halloween is just around the corner, but many are already spooked by what’s going on in the real estate market. The biggest challenge is affordability, mainly due to interest rates. As you are likely aware, they’ve been climbing all year, now sitting close to 7%. This is essentially double what rates were just over a year ago. According to George Ratiu, manager of economics at Realtor.com, “With the rate for a 30-year mortgage 300 basis points higher than in 2021, the buyer of a median-priced home this week is facing a monthly payment that is 66% higher than the same week in 2021.”
This is understandably concerning for most buyers - many cannot afford the same home they would have a year ago. But, there are opportunities and solutions that can still allow you to move into the home of your dreams. And 8z can help make that happen with our Cash Buyer program. You can shop for your new home with less stress and more confidence, knowing you're in charge of the process with a guaranteed cash offer. Not only does this program allow you to move quickly when your dream home hits the market, but research shows that cash offers also can save you 1-2% on the purchase price. If you were looking at a $600,000 home, that's $12,000 back in your pocket! If you want to take control of your next home purchase, be sure to check out 8z Cash Buyer, and call me with any questions!
Also, it's important to remember that the mortgage rate you start with isn’t the mortgage rate you have to be stuck with - ‘marry the house, date the rate’. There are several ways to look at this: Let’s say you close on a home with a standard 30-year fixed mortgage. While your first year or so will be at the current rate, many experts believe we will see mortgage rates come back down in the next year or two. This would give you an opportunity to refinance down to a lower rate and save thousands over the life of your loan.
You can also consider an ARM, or adjustable rate mortgage. With this type of loan, you start at a lower-than-market rate, and then it increases over the life of the loan. So for the next couple of years, let’s say you’re paying below-market rates, then, when your adjustable rate becomes greater than the fixed rate, you can refinance to a fixed rate mortgage to avoid those higher costs. It’s important to have these discussions with your agent and/or lender, so you can navigate the market with confidence.
Another opportunity for buyers right now is equity. If you’ve owned a home over the past couple of years, there’s a good chance you have a significant amount of equity, as prices jumped over the pandemic. One way you can use that equity is to ‘buy down’ points on your mortgage. If you’re looking at a 6.5% rate, perhaps you could tap into your equity and buy that down to 5.5%.
While affordability is the main issue for buyers, availability is a different story. Over the past couple of years, the number of time homes spent on the market dropped to record lows - breaking the seasonal trend we see every year. But now we’re seeing this trend return, and the average time spent on the market is increasing. We’re also seeing a lot more active listings, so buyers will have more homes to choose from. What’s more, when you find a home you love, you also will likely have much less competition for that winning offer.
Over the past two years in the Denver Metro, we saw ‘shows to pending’ (how many showings until a listing goes under contract) spike to 27 in 2021 and 23 in January of this year. But now we’re back down to just 9, which means there’s less likelihood of a bidding war, having to offer over asking, or waiving important things like inspection objections.
Thinking about selling? Don’t worry, you have some great opportunities as well. While it’s true that homes are staying on the market longer overall, that doesn’t mean it’s a given. If you put the right strategy in place, you can still sell relatively quickly, and possibly over asking! It all comes down to preparation - professional photography, staging, etc., as well as a reasonable pricing strategy. Together, if we can nail all of these tactics, there’s a good chance your home won’t fall into those average statistics.
A recent real-world example: an 8z listing priced at $1.45 million - the sellers did just about everything to get the home ready for market: professional photos, video, and 3D Tour, staging, open houses, as well as an honest pricing strategy. After just four days, they were under contract - over asking! You may be thinking, “Okay, but I can’t afford to spend the money on all of these things.” That’s where 8z Listing Concierge comes in. With Listing Concierge, 8z pays up to $20,000 for improvements to get your home ready to sell. Then you simply pay it back at closing! The example above used 8z Listing Concierge, and after selling for more than their asking price, they still had money to spare after paying it back.
While the market has shifted rapidly throughout 2022, there are still opportunities to make the right move for you and your family. Call or email your local 8z agent if you’d like to discuss your options!
