Tales From The Front - Date The Rate And Other Cliches

Tales From The Front - Date The Rate And Other Cliches

Nothing new here, mortgage rates are staying in the 6% range and local prices are holding up, so we are continuing to see a stalemate between buyers affordability and sellers' limiting supply and hanging on to 2021 pricing expectations. 

Looking at the Median List Price for Menlo Park over the last 18 months, we can see a correction in 2022, but not in 2023 as buyers get more "used to" current interest rates. 

However, the number of homes on the market and homes sold are about 50% of 2022 as there are fewer buyers in the market and fewer sellers finding a compelling enough reason to move out of their 3% mortgage and into a 6% mortgage.

This is leading to lenders seeing loan originations way down. Mortgage banks mainly make money by originating new loans, then they resell them, so they need to keep writing new mortgages or they start laying off mortgage loan officers. This leads us to today's cliche: Date The Rate, Marry the House. 

Not as glib as it seems initially, it leads to two strategies for both buyers and sellers to lead to a transaction.

1) Date the Rate - For Buyers, if you need a new home and find one that works, don't let current interest rates be a barrier. Working on the reasonable assumption that mortgage rates will decrease in the next 5 years, opt for an Adjustable Rate Mortgage (ARM), to reduce monthly payments now and plan to refinance in the future. To originate an additional mortgage, your lender will likely waive any pre-payment penalty and potentially offer a free future refi.

2) Seller Rate Buy Down - Home Sellers can tap some of their equity and appreciation to credit the buyer some cash to pre pay interest and reduce the buyers' effective interest rate. Think of how your house could stand out in the marketplace of 6-7% mortgages if it was marketed as; Own this home for 5%. Generally, less of a hit than a price reduction, and a sophisticated approach to addressing a buyer challenge.

If you are considering a move, and would like to discuss these ideas more, let me know and I'd be happy to chat.

Thanks for reading.


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Chris Iverson has worked in the real estate industry for over 18 years and has amassed a renowned class of clientele and unmatched experience.

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