Market Has Noticeably Slowed Down. But Who's Selling? Who's Buying?

The headlines change daily, causing chaos, fear and uncertainty. But the effect is clear: Buyers and Sellers are afraid. It's understandable. We know there are going to be effects from tariffs, more inflation, and cost of goods rising. We also know that this affects real estate as the cost of materials and building go up. So while there may not be a flurry of buyers, the prices are not expected to crash. We still have way too many people locked in below 3%, and too many people who bought 10-15 years ago who have too much equity.

So Who's Buying Right Now?

- Pent up buyers who have been waiting over 12-18 months for interest rates to drop, and don't see that happening are just going for it.

- Renters in the $4000-$7000/mo bracket) who have seen their rents rise year over year are also starting to look at smaller homes and a hedge against inflation.

- 1031 Exchange Investors

- People who need to diversify while the stock market remains volatile

Who's Selling Right Now?

Sellers who bought in the past 18-24 months who are locked in at 6-7% and sellers who have a lot of equity--those who bought between 2009-2013, are starting to sell. The psychology is interesting since owners locked into <3% mortgage rates are not selling--it's like they don't want to let go of their unicorn rate. (Note: the average 30yr interest rate since the 1970s is 7.75%. Not vastly different from today's rate of 6.69%, so yes, rates under 3% is unheard of). 

Mortgage Rate or Sales Price -- Choose One

In just about any market, you have to choose between a low interest rate and a high price, or a high interest rate and a low price. It's just the way of housing supply and demand.

Between 2020-2022, the interest rates were low, but prices were astronomically high. We're talking overbidding by 25-30% in some cases. Ridiculous--just to get a rate that you're going to refinance down the line, pay off or end up selling before the 30 years is up? The wiser thing to do is to buy at a discount and refinance later. 

You buy a property worth $1M for $1.3M, at a 3% interest rate. You're paying nearly $3750 a year more on property taxes.

You buy a property worth $1M for $950K, at a 7% interest rate. You're paying $4375 LESS a year in property taxes, and also get a tax write-off on the mortgage interest, so you end up paying about the same (or less per month if you put a bit more down to offset) as the $1.3M house. Not only that, you'll end up refinancing when mortgage rates drop, or having enough equity in the shorter term future to cash out or trade up. 

“Outperforming the majority of investors requires 

doing what they are not doing.” 

- Sir John Templeton