The new NORMAL.
I have never had a client regret buying a house. I was thinking about it this week because I was talking about how people are always so mad they didn’t buy back when….
Rates were lower.
Prices were lower.
There was more inventory.
And of course if you just sit in anger, in a couple of years you can be mad you didn’t buy now.
I thought there has to be someone who shouldn’t buy now. I couldn’t think of anyone who would fit these criteria. So I started wracking my brain for someone I know who regretted buying. I can’t think of anyone! Even the guy who lost his job in the pandemic (let’s be honest, if I’m not trying to protect identities there were a few of these) They were so fortunate to have a fixed monthly payment and a bank that wanted to help them and offered a forbearance. Even the couples who’ve gotten divorces, the equity they built has given each partner more options plus the home often remains the source of stability for the kids. The borrowers who’ve gotten better jobs and needed to move have had their home as an asset that gave them more options…The investors I work with, none have regretted buying a rental…
I literally can’t think of a single client over the past 12 years who wishes they didn’t buy the house!
So I’m going to hold your hand while I say this:
Interest rates are not going to come down. If you want to buy a house, you have to just do it.
(You should practice saying this gently to your own clients.)
We are ending the week pretty flat with mortgage bonds, meaning rates mostly unchanged from last week. On Wednesday we got some hot inflation numbers, yet again. Mortgage rates jumped. On Thursday mortgage bonds fully recovered for no apparent reason. The economic factors influencing interest rates, specifically the Fed’s stance on hiking, lowering, or continuing their pause, are nearly impossible to predict. We can be optimistic about the spread closing between the 10-year treasury and 30-year fixed rates. That would help us for sure. Another major factor that could improve mortgage rates would be the government changing their valuation of gold.
What does gold have to do with mortgage rates?!
The US Government currently holds about eleven billion dollars’ worth of gold. This valuation is based on the 261.6 million troy ounces owned by Uncle Sam, which is about 8,200 metric tons. The price for this valuation is $42.2222 per troy ounce, based on a law set in 1973. If we update this bookkeeping to market value rather than book value, it will add $750 billion to the US Treasury, essentially overnight. This would change investor demand for bonds in a way that could be really impactful – in a good way – for mortgage interest rates.
I’m not telling you this because it should influence your real estate strategy, consider it simply anecdotal. The reality is that some people will bite the bullet and get after their real estate goals this year, and some people will continue to find excuses not to.
I have one more story to share today.
On Monday this week, I met with some first time homebuyers who came in a year after our initial meeting. When we met in early 2024, the main issue was their credit scores. I gave them some homework to boost those. We stayed connected and then recently, they said they were ready for me to pull it again – PLUS she had gotten a new job which was a huge boost to her buying power because she switched from variable hours to a salary. They can now shop at a price point $100k higher. They have saved up funds. They are so excited to buy their first home and qualify in the $400,000 price range.
There aren’t a ton of great options in Reno for $400k.
That’s fine, they are going to look in Carson and have a short commute to work because they understand it will be temporary. They are looking at it like a steppingstone to get them into the house they really want a few years down the line.
Oh my heart felt so warm.
Immediately after they left my office, I jumped on a strategy zoom with another client. He’s super bummed out that when he bought in 2020, he didn’t buy a bigger house. He’s doing really well financially, has excellent credit and will have about $200k in equity from the house he did buy to use for his down payment on the next house. I have a lot of respect for how detail oriented he was with his budget and cash flow management. He’s considering renting and my concern is that he will be trapped in a rent cycle. Plus it was also quite the contrast to the clients who were just sitting in my office…
I share this story because the real estate market is always going to be a glass half full or half empty scenario. There will always be a reason to look back with regret for not taking a certain action. But truly, if you want to buy real estate – you have to just be willing to find a way. There are people doing it with less money than you, less income than you, worse credit than you, and the list goes on and on…
How do you think you can best relay that message to your clients?