Perspective is a funny thing isn’t it. I mean, you can have two different people receive the same information and draw two different conclusions. I used to teach this lesson to my kids by drawing a “6” on a piece of paper. I would have them sit on opposite sides of the table and put the paper down between them. I would then ask each of them what number they saw. One would see a “6” while the other would see a “9”. It all comes down to perspective.

One of the challenges we face today is being able see things from a different perspective, especially in terms of the news and headlines. I don’t watch a lot of news myself. I catch a weather forecast every now and then but that’s about it. Somehow, I still seem to know what’s going on. The reason I don’t watch is because all headlines and stories seem to focus solely on the negative. It’s depressing, to be honest. I remember hearing, or being taught, very early on that there is no such thing as good news or bad news, just news. It’s your interpretation of the news that makes it good or bad. That doesn’t mean you won’t react with sadness, happiness, or anger, but those are emotional reactions to your interpretation.

I bring this up as most of the news stories and articles about the current real estate market are focused on how challenging and difficult it is. Low inventory, bidding wars, frustration, etc. While I admit this market does have its challenges, it also has its opportunities. The biggest opportunity for both buyers and sellers is what I discuss below.

The Biggest Positive for Buyers: Mortgage Rates

While it’s true that mortgage rates are higher than they were a month ago it doesn’t mean that buyers have missed the boat. I think we need to add some perspective to current mortgage rates. While mortgage interest rates are no longer in the mid 2% range, the 3.2% average today is still way below historic norms and much lower than the 4.94% average rate in November 2018. As mentioned above, it is all a matter of perspective. Take a look at the following graph that shows the average mortgage rate going back to 1971. While today’s rates are not quite as low as a couple of months ago, they are still remarkable when looking back over the past 50 years;

These mortgage rates represent a huge advantage for buyers as they have helped to not only keep mortgage payments affordable in the face of rising home prices, but accelerated the accumulation of wealth. The latest Homeowner Equity Report from Corelogic shows how homeowners saw major gains in their net worth last year, all thanks to owning a home. Frank Martell, President and CEO of Corelogic explains:

“Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership. This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”

Another study from Corelogic shows that the average mortgaged home in America right now has $204,000 worth of equity. While these low mortgage rates are a big positive for buyers right now, experts forecast they will continue to rise as the year goes on. If you have been considering purchasing a home, now is a great time to get the process started so you can secure a loan at today’s low mortgage rates.

The Biggest Positive for Sellers: Low Inventory

The best time to sell any product is when demand is high and competition is low. The imbalance between supply and demand will cause a sale to be made at the highest possible price in the shortest amount of time. Today, there are simply not enough homes on the market compared to the number of buyers wanting to buy. This is resulting in a very strong sellers’ market. According to Danielle Hale, Chief Economist at realtor.com:

“Total active inventory continues to decline, dropping 50 percent. With buyers active in the market and sellers still slow to put homes up for sale, homes are selling quickly and the total number of active available for sale at any point in time continues to decline.” (See map below):

While this map shows the year-over-year inventory decline at the state level, each local market will be different. In Frisco and Prosper, TX, for instance, inventory is down 85% year-over-year as of March 1, 2021.

The limited supply of homes for sale continues to challenge the market. Buyers looking to take advantage of low-interest rates are finding it difficult to find a home. According to the National Association of Realtors (NAR), on average homes are receiving 4.1 offers. I can tell you I know of agents that have had listings receiving 15 to 20 offers and recently read a report of a home receiving 88 offers in the first week. That won’t last forever, especially as more homes come on the market this spring. I have already seen an increase in new listings within my own neighborhood.

These bidding wars are one of the factors keeping home prices strong and giving sellers leverage in the negotiating process. This leverage can help with the uncertainty some sellers have in wondering where they will move to once their home sells. I have seen sellers negotiate 6-month leasebacks and flexible moving dates as part of the terms of the contract.

Homeowners that have been wanting, and are in a position, to sell shouldn’t necessarily wait to make a move. As more inventory comes on the market, which is expected this spring, some of the leverage you have in negotiations will be lost as there will be more competition. Rising interest rates, coupled with rising inventories, will cause a little more balance to come back into the market. I’m not suggesting this is going to be a major shift or that it’s imminent, but current conditions won’t last indefinitely.

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Bottom Line

There are positives to the current housing market whether you are considering buying or selling. Schedule a Call with me today so we can discuss how these conditions play to your advantage in our local market.