Stop Living In The Past
My inspiration for this week’s article came from Jethro Tull’s 1969 hit “Living in The Past”. It seems that we cannot let go of the 2020-2022 timeframe when we had home prices rising at 10-20% per year in some areas, the multiple bid wars, rates below 4%, sellers paying nothing towards closing cost and/or points, no one was accepting contingency offers, and where houses were only on the market for 10 days or less. Truly, the definition of a seller’s market.
I have been doing this for 40 years now, and that period was truly an anomaly. The facts are as follows. As we enter 2025, mortgage rates have averaged, over the past 50 years, slightly over 7%… funny… we are just below that level now. The average home price in the Metro Atlanta area has fallen .9% on a year-over-year basis. Seller-paid closing costs are on the rise, and some builders are now paying over $25K towards cost in some areas. Houses are now on the market in Metro Atlanta for over 55 days compared to 32 days last year at this time on average. Sellers are beginning to accept contingency offers, and home inspectors continue to be one of the biggest deal killers out there (I will save this topic for another article).
Buyers, however, are still being told it is a very competitive market by agents due to “supply” issues. The data I have just shown would tell a totally different story. With houses being on the market for almost two months and rising each month, the “competitive” market seems to be more of a punchline than fact. The buyers I am seeing getting new contracts today are buying correctly priced homes with some help, not in all cases but some, from the seller with closing costs, and the sellers are also helping with some inspection issues. Rates are slightly below historical averages, and anyone waiting until rates get below 5% will most likely have a long wait. The housing market has done well in the past, with the combination of things I am now seeing once again. The difference in a principal and interest payment on a $500K loan with a 30-year rate of 7% vs. 6% is about $330 per month. If the seller is now paying $10K towards cost, which they were not doing when we were at 6%, you save $10K out of pocket and would make your break-even point at the higher rate for almost 2.5 years. If you refinance within 2.5 years (and I think that will happen), you save money and get the home of your dreams for less than you would have when rates were 6%. Truly simple math.
The 2020-2022 real estate boom is in the past, and looking for that to happen again could very well be gone with the wind. We are back to a more normal market, and I would even say we have now switched to a buyer’s market. We simply need to forget what things were like several years ago and embrace the market we are in, which, based on my calculations, is not that bad. It is a great time to buy a home!
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value to you.
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Blog post date: Wednesday, December 4, 2024
