Q: “Denise, we are having a weird moment in our market right now. Inventory is still really tight, but a lot of buyers seem to be on a break! There are a lot of homes that have been on the market for a while. BUT when I try to talk to my buyers about this now opportunity, they say they want to wait until prices come back down. It seems like there is this mentality that prices are going to correct like they did back in 2009-2011. I just don’t see that happening. How can I get my buyers back into reality?”
You are right; this market isn’t the market of a decade ago. Back then, there were a surplus of homes and very loose lending standards which made it so people couldn’t afford the monthly payment, including those with adjustable rate mortgages. That and the havoc in the financial world led to a recession, which lead to unemployment which led to a surplus of housing. That is not the market we are in today.
What I would suggest is creating a “then and now” visual that addresses the ways these two markets are different in your local area. Create a table with two columns like below, and begin filling in the way the following categories are different for your area including:
*You may want to check with a lender to see if there are any local statistics available regarding percentage of equity either when the home is being purchased or overall. Buyers are making much larger down payments now than they did during the sub-prime crisis. Higher down payments and more equity means a healthier housing market.
Also, it is important to talk about price corrections versus a bubble. People think bubble, they think crash. However, prices can indeed adjust up or down as supply and demand fluctuates. For example, if builders are able to introduce a lot of new inventory to the market, that change to supply could affect prices. If prices get too high for local wages, demand will come down and prices will adjust. If more people move to your area, that changes demand which can affect prices. If an employer decides to lay off people who then have to relocate, that can change both the supply and demand. That is why it is important to look at what is happening in your local economy to determine the health of your local employers.
Furthermore, it is possible for house prices to continue to climb. Look at New York and San Francisco – some of the most expensive real estate in the country. As long as people can afford to live there and compete for prime housing, they will.
Arm yourself with facts and some visuals and you will be well-equipped to talk truthfully about the current market. None of us have a crystal ball and there is no way you can anticipate all the what-ifs which is important to remind your clients of, but share the indicators. Knowledge is power!