Marketing

Why Yesterday’s Prices Don’t Work in Today’s Real Estate Market

July 26, 2024

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Navigating the Current Real Estate Market: Insights for Buyers, Sellers, and Loan Officers

The real estate market is constantly evolving, and today’s landscape presents unique challenges and opportunities for buyers, sellers, and loan officers alike. Let’s dive into some key insights and strategies to navigate this market effectively.

Current Market Conditions

  1. Builder Inventory: Home builders currently have 102,000 completed, unsold homes on their lots – the highest level since 2009. This figure is close to the median inventory level dating back to 1987, indicating a return to more balanced market conditions.
  2. Interest Rates: Contrary to popular belief, we’re not dealing with high rates but rather a return to normal rates. This shift in perspective is crucial for understanding the market dynamics.
  3. Price Expectations: One of the main challenges in the current market is that many sellers are still holding onto yesterday’s prices, which are often unrealistic in today’s market conditions.

Strategies for Loan Officers

  1. Set Realistic Expectations: Have open conversations with borrowers about reasonable price expectations. Explain that while some sellers are holding onto higher prices, extremely low offers are also not reasonable at this point.
  2. Encourage Buying Now: Advise clients to consider buying now rather than waiting for the market bottom. If rates drop by 2-3% as predicted, the market could heat up quickly, and current concessions may disappear.
  3. Develop Sales Skills: In this market, strong sales skills are crucial. Consider joining professional development groups or book clubs to enhance your abilities.

Future Market Outlook

  1. Rate Predictions: Fannie Mae economists expect two rate cuts and a continued decline in rates through 2025. Their forecast suggests a near full percentage drop over the next 24 months.
  2. Market Dynamics: Despite increased listings, existing-home sales fell in June. Economists predict that increased supply and affordability-constrained demand should result in moderating prices.
  3. Price Trends: Home prices were up 3% on a non-seasonally adjusted basis in the second quarter, but this trend may change as the market adjusts.

Considerations for Different Market Participants

  1. For Buyers: Consider the trade-offs between waiting for lower rates and potentially missing out on current concessions and less competition.
  2. For Sellers: Be realistic about pricing. Holding onto yesterday’s prices may prevent your home from selling in today’s market.
  3. For Loan Officers:
    • When working with banking platforms, be aware of the disadvantages in rate flexibility compared to brokers.
    • For brokers, consider the long-term relationship with wholesale lenders before moving loans for small rate differences.
    • Loyalty to lenders who have been loyal to you can pay dividends in the long run.

In conclusion, success in the current real estate market requires a nuanced understanding of market conditions, realistic expectations, and strategic decision-making. By staying informed and adaptable, all participants can navigate these changing conditions more effectively.