Great opportunities exist where perception is different than reality.
The narrative today is that higher interest rates and nearly a decade of price gains have pushed housing to an unaffordable level and a pullback is imminent.
The reality is actually very different.
Today housing remains affordable compared to history. Housing affordability considers interest rates, home prices, and buyer’s incomes.
As home prices and interest rates have climbed, affordability has decreased. But when you look at it in historical terms, housing is actually more affordable than average.
The Housing Affordability Index measures home affordability. A reading of 100 means that the average American can afford 100% of the average priced home. A reading of 140 means the average American can afford 140% of the average home.
As you can see the historical average is 140, and despite increasing interest rates and home prices, the Affordability Index remains above historical averages.
Couple this with the fact that interest rates have actually been moving down since December, means that housing is actually becoming more affordable and we are likely to see a very strong spring and summer buying season.
There are two primary strategies you can employ to take advantage of markets that are temporarily slowing.
The first is very obvious, you can make an offer below the asking price. This is the strategy that most buyers and Realtors immediately think of when they write up an offer.
The second strategy, which has significantly more impact on reducing your monthly payments, is the seller paid buydown strategy. This strategy uses money from the seller in the form of a seller paid closing cost concession, and is used to permanently buydown the interest rate on your home loan.
We use the Total Cost Analysis to demonstrate the power of the seller paid buydown strategy. You can check out how the strategy works here: https://edge.mortgagecoach.com/report/edgereport.html#1a7932ba-c658-4a69-a579-66fb9276219c
Compared to a price reduction, concessions from the seller used to permanently buydown your interest rate is approximately 300% more effective in reducing monthly payments.
That is why today’s market is a golden opportunity for those whom know how to play it right.
You can take advantage of a momentary slowdown in demand and quickly turn it to your advantage by negotiating seller paid closing costs, interest rate buydown, and in some cases price reductions. If you have any questions, please don’t hesitate to reach out to us!
