By Maddie Jostol, Marketing Manager
The economy ebbs and flows, and with those fluctuations come different concerns from home buyers and sellers. As an agent, you need to be prepared to walk your clients through the fears and unknowns, serving as a trusted guide. Your clients will want to ensure their home purchase is a smart (and affordable) one.
When it comes to the affordability of a home, interest rates make a massive difference. They’re on the rise, which means you’ll likely be hearing – if you aren’t already – major concerns being voiced from your clients.
Inventory is low.
With today’s thriving economy, the housing market is hot all across the US. What we’re seeing is that there is extremely low inventory in the major markets. For agents, this means winning a listing is tougher than ever. For buyers, this means competitive bidding wars and cash offers swooping in.
NAR’s annual Profile of Home Buyers and Sellers revealed that in 2017, the typical home was on the market for just three weeks.
Many real estate professionals are starting to feel like there’s more agents than there are listings. While this isn’t quite the case, it can certainly feel as though there aren’t enough listings to go around. According to NAR, there were 5.51 million existing homes and 612,000 newly constructed sold in 2017, and there were 1,334,668 NAR members as of July 2018. Tight inventory increases the feeling of competition and adds pressure to an agent’s ability to win new listings.
Buyers are fatigued.
The home buying process can be stressful and discouraging, often causing buyers fatigue, which stems from seeing a lack of inventory in the market. Houses aren’t on the market long enough to go through the typical home buying process. Decisions are made sight unseen, inspections are waived, and above-asking offers are made. This can be incredibly discouraging for a buyer, surfacing fears around timing, affordability, and their ability to find the perfect home.
Interest rates are on the rise.
Freddie Mac published research showing the steady month-to-month increase in interest rates so far this year, starting at 4.03% in January 2018 and increasing to 4.57% in June 2018. This continuous rise is what has caused a stir across our industry, worrying many home buyers.
As published by Bloomberg, “The average rate for 30-year home loans climbed this week to 4.38 percent, the highest since April 2014, according to Freddie Mac.” Shanne Sleder, a mortgage broker based in San Diego, commented on the data, saying, “At this point in time, people don’t like it but they can still make it work. It hasn’t gotten to where people are starting to back out of deals yet. As we get closer to 5 percent, that’s when they will start thinking about it.”
These rate increases are serving as both a concern and motivator for many buyers who want to purchase before they can’t afford to do so. Some buyers want to wait it out, hoping for a drop in rates, while many others want to move quickly, confident that the upward trend in interest rates only gaining speed.
You don’t need to be an economist predicting the future of the housing market, but you do need to be able to assist your clients through the process as they navigate through market information such as interest rates. Stay up to date with forecasts, but more importantly, know how you’ll respond to your clients’ concerns, no matter what twists and turns the market makes.