The burning questions of late undoubtedly tend to revolve around real estate. Is now a good time to buy? What about to sell? What are the current interest rates? Will they ever come down? The list goes on.
Having weathered the storm of ‘08-’09 we are so grateful to be able to offer some real-life perspective on where the market is now and where we see it headed. If you take nothing more from this article than the following, it is imperative to know we are not in the same situation we were in the big crash of 15 years ago. During that housing crisis, many homeowners had purchased their property with variable rate mortgages, 3-7 years prior, and when those interest rates stopped being fixed and started to fluctuate, property owners found themselves in a pickle. They were not just over-leveraged, but many had no equity in their homes. When their interest rate increased, property owners’ payments rose substantially, and many could not sustain the increase. For too many years prior, loans were made accessible to borrowers with low credit scores, higher probability of defaulting and in many cases, with limited to no verification on their income, job history, ability to repay, etc. A lot of borrowers were also “borrowing” their down payment funds to get the loan in the first place.
I participated in an Oregon Housing Economic Summit recently where they went more in-depth to what we are experiencing and why. A recent study released by CoreLogic indicated that the average homeowner in Oregon has more than $300,000 equity in their home which means home prices would have to fall 40% to reach the 2009/2010 negative equity shares. When the market crashed, the average homeowner had less than $70k in equity. Currently, we have less than 2% of homeowners with negative equity as compared to back then, when that figure was 26%.
Over the last few weeks in our local market, we have seen numerous sellers receiving multiple offers, particularly in the price points where limited inventory exists. This is not just in the entry level price points. In fact, for housing under $750k, we have on average, less than two months of supply available for purchase. This means if another home wasn’t listed, we would run out of inventory in two months. A healthy and balanced market typically has six months of inventory. We are also seeing incentives being offered to home buyers helping to offset their closing costs, including buying down their interest rates.
There is no question the interest rate today isn’t nearly as attractive as it was last year, but many lenders are offering no-cost refinancing options, giving the buyers peace of mind that the rate is only temporary and there are options for them once the rates stabilize. Truthfully, a rate of 7% is still below the thirty-year average of 8% and considerably more attractive than the 12-18% many of us saw not all that long ago. Lately, we are seeing more investors leveraging some of the equity in their properties to purchase additional investment properties while also seizing the opportunity to incorporate the incentives being offered by property sellers. By keeping things in perspective and focusing on solutions vs objections, the opportunities are plentiful.
If you are fortunate enough to be selling and then buying in the same market, you are in good shape because you are simply trading equity positions. If you are buying on the high side, you’re selling on the high side. Countless times in the last 6-12 months, we have counseled homebuyers and sellers on a case-by-case basis, formulating a plan on what will help them achieve their real estate goals. Being a part of your financial strategy team is something we take a tremendous amount of pride in and feel honored to be part of. Hands down, real estate is an incredible way to build wealth. It involves insight, forward thinking and a considerable amount of strategy but the rewards are boundless.
If you are considering buying, selling, investing or just want to round table some ideas, please don’t hesitate to reach out. We would be more than happy to share our perspective with you to see how we can all work together to achieve your goals.
