Now, I think they’re even better prospects than they were in February.
Signs are pointing to prices leveling off or even dropping. In fact, last week Redfin reported that 15% of homeowners have lowered their asking prices.
Encourage owners who have been waiting to list their unoccupied houses…
For homeowners who have been holding off, waiting until prices went even higher, it does look like now is the time to sell. I thought so in April, when I wrote a set entitled Why Homeowners Should Consider Selling in 2022.
Now that interest rates have been bouncing in the 5 ¼ to 5 ½% range, I believe leveling off or dropping is even more likely. Right now, you still have an abundance of buyers, but will that last if rates go to perhaps 7% or beyond? It may all depend upon the intersections between income, home prices, and interest rates.
I think the buyers will still be there, but they will progressively be searching at lower and lower price points. Thus the buyer pools at some price points will begin to shrink, and some homeowners who have a real need to sell will lower prices in response. And that, of course, can lead to a domino effect.
So why not encourage those homeowners to list unoccupied houses while prices are high?
Experts disagree on whether we’re in a bubble right now…
Stephen Moore believes the answer is yes, and that it may burst soon.
Mark Zandi of the Washington Post says “No, but…”
Your market may or may not see a difference…
How rising interest rates will affect pricing all depends upon your market. In 2021, approximately 30% of homes were sold for all cash. From what I have read (and it makes sense) these are homes at the high end of the scale, and the buyers can and will pay whatever they deem reasonable.
The only thing that would likely affect their decisions would be a sustained drop in the stock market.
70% of home buyers still need mortgages.
For them, rising interest rates will affect the price that they are able to pay for a home. For those whose income is limited, “want to buy” and “can buy” are often two different things.
If you like numbers, here’s how principal and interest payments on a 30-year $200,000 mortgage compare at different interest rates:
- 3%: $843.21
- 5%: $1,073.64
- 5.5%: $1,135.58
- 7%: $1,330.60
Low interest rates made it possible for buyers to pay higher prices.
And then along came April. The Fed began raising interest rates more aggressively. The rise from approximately 3% to approximately 5% meant that buyers who needed to stick with a set monthly payment could borrow only about 80% of what they might have borrowed a few months ago.
According to DQYDJ.com, only 34% of the households in the U.S. earn more than $100,000 annually. Only 10% earn more than $200,000. Meanwhile, 50% earn less than $68,000. What that means to me is that there is a limit on how much people can spend on a monthly mortgage payment.
This Realty Times Article explains the discrepancy between household income and housing prices, without mentioning the effect that rising interest rates will play. I expect a few millennials will take issue with the writer’s statement that many millennials might not know how to find a real estate agent, but aside from that, it’s a good article.
Find and list those unoccupied houses…
Take a drive around your territory. Note the addresses of vacant homes, then reach out to the owners. You should be able to find owners’ names and addresses through a search of County records, or by using a service such as Cole Information.
Considering what’s going on, using the two sets together might be the most productive. It’s easy to assume that all homeowners and would-be homeowners already know that interest rates are climbing, but they may not. Many people are shunning the news these days because so much of it is depressing. And considering that a few hot topics are dominating the air waves right now, interest rates might not be getting much attention. (I don’t know, because I don’t watch much TV.)
Whether you choose to list unoccupied houses or pursue some other niche…
Remember that the key to success in prospecting is consistency. Studies show that it takes a minimum of 5 “touches” to get response from the majority of homeowners. (And yet, most agents mail from 1 to 3 letters, then quit.) If you’re wondering why so many touches are necessary, click here.
If you start, don’t stop. Use my letters or write your own. Then continue following up with market reports, just listed and just sold cards, news about the community, and even holiday greetings.
I wish you boundless success.