The (Temporarily) Lost Buyer/Seller

The (Temporarily) Lost Buyer/Seller

Credit to Leonard Steinberg

There is a wave of people that is reluctant to sell now and buy a new property at a notably higher rate than they did before. These homeowners bought when rates were really low - or refinanced at a low rate - when rates dropped to historical lows. It could take a while for them to either feel comfortable with the essential need to move, regardless of rates, or hopefully wait for a moment when rates come down again, maybe not to the super-low levels that spoiled us all a little bit, but to more 'realistic' levels.

This group has a few options at their disposal:

1. Wait for rates to come down to more realistic levels, hoping the FED has raised rates too far, too fast.
2. Sell and buy at a higher rate with the hopes of refinancing later when/if rates come down.
3. If they are selling a high priced home to buy a smaller, lower priced home - or a home in a cheaper area - they may not need as much - or any -financing.
4. UP-sizing now can deliver a healthy balance sheet: If you sell a $1 million home for a 10% discount, you experience a $100k loss. If you are buying a $3 million larger home with a 10% discount, that's a $300k 'savings' and the $200k difference could cover the costs of a higher rate for many, many months or even years. Or refinance when rates are dropped when a recession hits (they usually happen every 7-10 years)
5. Simply acknowledge new realities and live within them, possibly lowering a budget if possible. Death, divorce, career-moves, births, marriages, etc don't stop when recessions or slowdowns hit.....or when rates rise.
6. Buy your new home with the higher interest rate and rent it out, planning to move into it in 2 years when hopefully rates come down. You can deduct all the mortgage interest from an investment property.....
7. If you have large cash reserves, buy your new home with all/mostly cash and then finance later when/if rates come down. If cash earns about 3% in a savings account, saving 3-4% compared to a mortgage may be a wise investment and in many areas home prices are stable and still rising.

The key to all of this is: everyone's circumstances and finances are different. We as realtors, identify options for clients' consideration to help them formulate intelligent strategies. Waiting and seeing is a strategy too, but only if you ignore the fact that we are ALL running out of time.