Saturday, October 14, 2023 / by Kathryn Jones
Fear in the Real Estate Market & How to Leverage It for Yourself
"After the Sept. 11 attacks, the world stopped flying for awhile. Suppose that at this time, you had made an investment in Boeing , one of the world's largest builders of commercial aircraft. Boeing's stock didn't bottom until about a year after the tragedy, but from there, it more than quadrupled in value over the next five years. Clearly, although Sept. 11 soured market sentiment for the airline industry for quite some time, those who did their research and were willing to bet Boeing would survive were well rewarded."
- Quote from an article in Forbes from 2009
Famed investor Warren Buffett is credited with the advice that it is wise for investors “to be fearful when others are greedy and to be greedy only when others are fearful.”
I don't want to trivialize world events in the name of financial gain. But I do think many buyers are missing an opportunity. Some talk like they've given up on the American Dream. May it never be so!
What I have learned in 25+ years of sales is that "Confusion Prevents Commitment."
Buyers are confused.
Sellers are confused.
Agents are frustrated and confused.
New Construction Builders are NOT confused, and acting accordingly. (More on that in a moment.)
Consequently, the number of sales is way down.
This is an opportunity for BUYERS, and I'll show you why.
Let's look at this category by category:
- Buyers are feeling the effects of interest rates and affordability. Maybe this is where you feel stuck. Keep reading.
- Many are adopting a "Wait and See" approach, while they wait on the sidelines.
- Some buyers have noted that lease prices have started to drop a bit, so they're signing up for more renting.
- The resulting REDUCED BUYER DEMAND is creating a situation where sellers are not so cocky as they were a couple of years go.
- Sellers are feeling the effects of the reduced demand.
- Many sellers are reducing prices to stimulate traffic.
- Sellers are confused in what it will take to get a buyer to actually commit.
- **Now that the word is out that the market is slow, the sellers who remain on the market are those who NEED to sell. Those who thought they'd experiment to see who might be interested...they're feeling this new environment and withdrawing. Maybe they'll be back in the spring. Maybe they'll decide to remodel. Maybe they just like their 3% interest rate too much to really be motivated at all.
- So that leaves people who REALLY WANT TO SELL. They will negotiate. They will often help you buy down your interest rate!
- Agents are frustrated. And confused.
- They can't get their buyer clients to make a decision (i.e. "reduced demand"). Below is a screen shot of the "Quintessential answer" I got when I posed this question on a popular Austin Real Estate page: "Who has a buyer that CAN buy, IS shopping, and just refuses to make a decision? What reasons are they giving you for not writing an offer?" I got ~40 responses, and this one summed up the responses best:
- They can't get their buyer clients to make a decision (i.e. "reduced demand"). Below is a screen shot of the "Quintessential answer" I got when I posed this question on a popular Austin Real Estate page: "Who has a buyer that CAN buy, IS shopping, and just refuses to make a decision? What reasons are they giving you for not writing an offer?" I got ~40 responses, and this one summed up the responses best:
- Agents don't get paid if people won't make a decision. So imagine how LISTING AGENTS feel as their listings sit while buyers play the game above.
- They're lowering prices.
- They're having to get serious with sellers about competing with new construction.
- They're hoping the tide will turn, but the news cycle is not saying encouraging things.
- Some are begging for offers.
So the market looks tough. Challenging. Confusing. It's scary, kind of like buying Boeing stock after 9/11, right? Remember what Warren Buffett said about buying when others are fearful?
Investors say "you make your money when you buy, not when you sell."
Given the "market mood" I've detailed above AND....
Given that most anyone you ask would paint a rosy economic picture for the future of our area AND...
Given that all the talking heads say that when rates do come down, demand will be fast and furious again AND...
Given that New Construction Builders are offering massive incentives to get you to make a decision...
It's time to act for a buyer.
Nearly 45% of the listings in Georgetown that are "contract pending" show "2023" in the "Year Built" data field. Yes, nearly HALF of what is selling out there is NEW construction. It's because builders are non-emotional business people who need to make a payroll. So they are throwing slashing prices and offering incentives. For example here are a couple of ads I've gotten related to buying down an interest rate. Imagine if interest rates were removed as a hurdle for you...
With so much of current demand going to the builders who are not afraid to get a deal done, don't you think we can leverage this to get you a good deal on a resale as well?
The point is...OPPORTUNITY IS KNOCKING. And the Russ Phillips Team is here to help you navigate this environment to your advantage.
If you decide to just wait it out, I have two questions:
- How much will you waste on rent, which does NOTHING for you (no tax deductions, no equity build-up, and on and on)?
- How will you feel when you decide it's "safe" and you're in the same boat as this buyer...?
