A recent email I sent out…

Dear …,

I hope this message finds you well. As a valued client, I want to ensure you are well informed about the current real estate market dynamics, especially since you are considering waiting until Spring to buy a home with the anticipation of lower interest rates.

As part of my continued efforts to ensure you see the entire picture of what’s happening in our real estate market, I am going to show you specifically what buying a home today looks like versus waiting for Spring and lower interest rates.

Before delving into the specifics, however, it is important to note that there are instances when you shouldn’t proceed with a home purchase.

You SHOULD NOT buy a home if you meet any of the following criteria:

• • Job Instability: Sure, specific financial criteria and job security standards must be satisfied to qualify for a home loan. In light of this, if you anticipate potential instability in your job security or are aware that your financial standing could be adversely affected by job loss or restructuring, do not buy a home right now.

• • High Levels of Debt: Yes, your eligibility for a home loan is contingent on your DTI (debt-to-income) ratio. Yet, if your debt load places you precariously close to the threshold where qualification for a home loan becomes uncertain, it is advisable to reconsider proceeding with the purchase of a home.

• • Short-Term Living Plans: Throughout history, anyone who has owned a home for a minimum of 10 years has come out the other side having equity. However, if you intend to own a home for just 1-3 years, that might not provide sufficient time to witness the fruition of your initial investment.

Assuming these factors don’t apply to you, I believe the current market presents a favorable opportunity that won’t exist in Spring (I’ll be making a purchase myself in January 2024).

Below, I will explain WHY by comparing the actual numbers for buying now versus waiting until Spring.

12/28/23 ACTUAL VALUES

• • Median Purchase Price (pricing reflects the prior 3-month period, in Spokane County, on 1 acre or less, stick-built home): $399,995.00

• • Interest Rate (I am not a licensed loan officer so legally I cannot provide a specific interest rate): Around ~6.8%

ESTIMATED SPRING VALUES

• • Purchase Price (pricing reflects the predicted price for the same home sold in Spring 2024; explanation below): $439,995.00

• • Interest Rate (reflected by market predictions for Spring 2024; explanation below): Around ~5.8

CONSTANT VALUES

• • Average Effective Tax Rate (Spokane County’s Average Effective Tax Rate): 1.20%

• • Loan Type (30-year fixed rate mortgage): Conventional Loan

• • Down Payment (reflected as a percentage of the purchase price; selected as an arbitrary value): 5% Down

In our current market, two significant factors work in your favor as a buyer. Firstly, buyer competition is subdued, as a considerable number of potential buyers either find themselves unable to qualify for a home loan due to elevated interest rates or opt to delay their purchase until rates decrease. This advantageous circumstance positions you to avoid bidding wars and multiple-offer situations.

The second favorable factor is seller concessions. In the existing market conditions, sellers are offering concessions to entice buyers and facilitate home sales. These concessions can be utilized for various purposes, including covering closing costs, reducing your interest rate, or a combination of both.

As interest rates decline, a resurgence of buyers is expected to flood the market. Industry experts project that a mere 1% drop in interest rates will reintroduce a staggering 5,000,000 buyers into the nationwide market. This influx is likely to trigger bidding wars, multiple offers, and inflated purchase prices, reminiscent of the trends observed between 2020-2022.

The subsequent increase in housing demand, driven by the re-entry of 5,000,000 buyers, is anticipated to eliminate seller concessions, mirroring the conditions observed during the 2020-2022 period.

From my perspective, the shift in interest rates is already underway, coinciding with the Federal Reserve’s confidence in managing inflation. Today’s interest rate, hovering around ~6.8%, represents the lowest figure since May of this year. A notable decrease from rates just a month ago, which were approximately ~7.3%, underscores the swift change in this trend. I anticipate this trajectory to continue into 2024.

Considering the comprehensive information provided above, the infographic below offers a side-by-side comparison of ‘Buying Now’ versus ‘Waiting for Spring & Lower Interest Rates.’

In Scenario 1, where the focus is on buying now, the ‘Home Price’ is set at the median sales price of $399,995. Additionally, I factored in ‘Seller Concessions,’ with $10,000 being a customary figure I have successfully negotiated for my buyers throughout 2023. In this specific case, the $10,000 from the seller was utilized to reduce your interest rate from approximately ~6.8% to around ~5.6%.

The cost associated with buying down interest rates fluctuates daily, and I obtained the current rate buy-down cost sheet from my trusted loan officer.

By purchasing a home today for $399,995 with a 5% down payment and leveraging $10,000 in seller concessions to lower your interest rate, your monthly mortgage payment would be approximately ~$2,670.

Now, in Scenario 2, which involves waiting for Spring and potentially better interest rates, the ‘Home Price’ is projected to be $439,995. This estimate accounts for factors such as multiple offers, bidding wars, inflated prices, and the expected impact of 5,000,000 more buyers entering the market nationwide. Notably, I excluded seller concessions in this scenario, as incentives for sellers to sell their homes may not be as necessary. Consequently, there was no interest rate buy-down, resulting in an interest rate of approximately ~5.8%.

Opting to buy a home in Spring under these conditions would mean paying $439,995 (an additional $40,000 for the same home). The upfront down payment would be $2,000 higher, and the monthly mortgage payment would be around ~$2,962.

This translates to a $292 difference in your monthly mortgage payment, achieved without requiring additional personal funds. Importantly, this difference is a product of leveraging the current advantageous conditions for buyers—specifically, low buyer competition and seller concessions.

It’s worth noting that the financial benefits outlined above are contingent on residing in the home for at least 3 years. This duration is crucial for recouping the $10,000 invested in buying down your interest rate.

Recognizing that this email is detailed and contains numerous figures, I intend to provide you with factual statistics and values rather than resorting to emotional sales tactics and ‘fluff’.

If, upon reviewing this information, you are reconsidering your timeline to buy, please feel free to reach out. I can connect you with my loan officer for pre-approval and assist you in securing a home before the market becomes more competitive.

Regardless of your decision, I hope you find value in the insights provided and wish you a safe and happy new year!

Jesse