The true cost of waiting to buy a home in today’s market
When I’m talking to a potential client for the first time, one of the first things I ask is about the timing:
“What is your timeframe? If I get you fully pre-approved today, are you prepared to start writing offers?”
If you are a Realtor, the question you should be asking ALL of your clients is: “If we find the perfect home today, are you prepared to move forward and write an offer?”
As a loan officer, I need to know if they are on the fence. How they answer that question dictates how I continue the conversation.
For example, I don’t need to go through the “cost of waiting” script with them if they’re super motivated and already have the sense of urgency.
However, if they are lukewarm in their response, I immediately work to light a fire under them to make them understand the true cost of waiting and not taking action.
If they wait 6–12 months, that paralysis by analysis can cost them thousands.
Here’s an example. It varies based on what the market is like, but let’s pretend the home they’re looking at costs $250K:
I can’t predict the future, but I can tell you what has happened in the last 12 months: home prices have gone up 12–13%. That means the same $250K home cost roughly $220K 12 months ago — a $30k increase. So unless the client can save at a pace of $30k a year, they can’t save fast enough.
“I can’t promise the same trend for the next 12 months but IF this trend continues, it will get increasingly more difficult to buy a home, which is why the time to take action is now.”
It’s not just the rising cost of homes that makes now the best time to buy. The interest rate bull market run is over and rates have bottomed out and are now moving higher.
In the last 6 months, rates have moved up about 0.5%. So payment-wise, it would increase your payment by $70/m on a $250K home. With a $70/m increase in payment, that lessens the qualifying power by over $10,000 on the purchase price.
At the end of the day, with home prices and interest rates both increasing, you can see how this can quickly price your client out of the market.
If you know someone who is fearful or is a first-time homebuyer, this educational script can help them be confident in their decision to move forward and buy now.
In addition to sharing this information with them, get specific with your clients. Pull up a house they are interested in and show them what the purchase price was two years ago for that same house.
When you show them they could have bought that $250K home for less than $200K just 2 years ago, this will inspire them to action!
We can’t predict where the market will be 2 years from now. We’re all hearing about the 2020 recession on the horizon but that doesn’t mean home prices are going to come crashing down. Inventory levels are slowly increasing and we are seeing signs that growth is easing in the housing market. But, inventory levels are still near all-time lows so it’s apparent that demand continues to outweigh supply. Population and growth drive home prices. Las Vegas is one of the fastest growing cities in the U.S. based on both employment and population. Also, what’s the #1 thing that affects value? Supply and Demand!
We need to be educating our clients!
As always, don’t hesitate to reach out with any questions — I’m here to support you and your clients in any way you need.