For more than two decades, Tim and Julie Harris have been leaders in the real estate industry, first as top producing agents, and now as sought-after business coaches. Their latest book, Harris Rules: Your No-BS Practical Step By Step Guide to Finally Become Rich and Free, is an international best seller. Learn more at timandjulieharris.com.
Let Clients Know Time is Money
Encourage buyer urgency during the slower winter months by passing on these market statistics.
December 6, 2018
Granted, it’s the holiday season and everyone is busy. But your clients need to know that the clock is ticking on the price of their potential new homes—and on the cost of their monthly mortgage payments. Potential buyers need to hear from you that time is money.
Just look at what happened to both home prices and interest rates in 2018. Median home prices rose 5.4 percent, according to CoreLogic, and interest rates increased about 15 percent‚ which is nearly a full percentage point year over year. Heading into the new year, CoreLogic predicts home prices to increase by another 4.8 percent, and Lawrence Yun, chief economist for the National Association of REALTORS®, predicts a 4.7 percent rise. The Mortgage Bankers Association, meanwhile, anticipates another 11 percent rate jump in in 2019 due to signals from the Federal Reserve.
Here is an estimate of what these moderate increases may look like to your buyers:
- Home price = $216,700
- Monthly principal and interest payment at 4.81 percent (excluding a down payment, taxes, and insurance) on said home = $1,138/month
- Home price = $226,884 (a 4.7 percent increase from 2018)
- Monthly principal and interest payment at 5.33 percent (excluding a down payment, taxes, and insurance) on said home = $1,264/month
IHS Markit, a financial services firm and prognosticator for global governments and businesses, forecasts that average wages will increase 2.5 percent in 2019. Home prices and interest rate increases will continue to outpace the wages your potential buyers will earn. It’s up to brokers and their agents to educate clients on the fact that the longer they wait to buy, the more they will pay for their home.
The good news for your buyers is that median home prices and monthly principal and interest payments are not as high as they were during the market peak in 2006, prior to the housing crash and financial crisis. That year, the median home price was $248,980 with a 6.7 percent monthly mortgage rate, which equated to a payment of $1,283.
It is your job as a real estate professional to be well-informed and honest with your clients about how time will impact housing costs—because if you don’t, someone else will.