Strategies for a Paralyzed Market
Let me show you how to use this market in your favor!
You have probably heard it said “Money can be made in bull markets, but fortunes are made in bear markets.” My personal belief is that you can find opportunity in any economy, but most people don’t know what strategies to employ. Let’s talk about some strategies to use in our current housing market to create long-term wealth and opportunity.
1. Buy for the long term.
This strategy is especially important for anyone who currently does not own a home. Right now in the Front Range we are still seeing low inventory; however, we are also seeing lower buyer activity. Anytime we see a lull in buyer activity there is opportunity for a buyer! If you are competing with fewer other offers, then you have an opportunity to make a lower offer, an offer keeping your contingencies (ability to re-negotiate based on inspection and/or appraisal), or to ask for a rate buy-down.
In Colorado, we have a unique market because our population continues to grow based on real market factors, including a great job market in multiple industries (tech, education, aerospace, military contracts, health care, engineering, etc). By negotiating your deal now while rates are higher and there is less competition, you can get into your home for a great price and terms. Later, you can refinance and see great long term upside in your investment through appreciation and a lower payment.
2. Hold existing real estate.
If you own a home now, I will be honest - it might not be the best time to sell! I have incentive to tell you that you should sell; I could help you sell your home, and overall more inventory helps us move to a more balanced market. However, I don’t think the time is right for most homeowners! Your payment is probably very manageable in comparison to what your payment would be on a new home, or if you do decide to buy another home you can probably rent out your current home for a profit. Your payment is likely locked in with a low rate (and therefore low payment), while rents have risen. If you have owned your home for 12 months or longer, you would probably be able to rent your home for a monthly profit. If you are looking to move into the next home but are worried about selling your home in this stagnant market, renting your home is a great way to hold your home and continue to accrue equity until the market picks up again.
3. Use creative financing.
Temporary rate buy-downs have resurfaced (see article on rate buy-downs). These are a great way to make your mortgage more affordable in the short-term, buying you some time (no pun intended) to refinance if/when rates drop.
Generally, seller financing is not something I encourage my buyers to explore. There is a lot of risk for both parties with private financing, and in most cases a traditional mortgage makes the most sense. But during these times of high interest rates if you can find a seller willing to carry the note of the home you want to purchase, you may be able to negotiate a rate lower than today’s interest rates.
4. Save for your downpayment
If you aren’t quite ready to buy a home, then it is a GREAT time to be saving. It is a great time for savings because of the fed rate being so high. (Currently my very liquid savings account with Ally Bank is earning me 4%.) So, if you don’t own a home yet or want to buy another home in the future, use this time to start socking away money for the next home-buying opportunity.
5. Buy a home from a builder
There are new home-build communities all over Colorado, including popular spots in the Front Range like Lakewood, Morrison, Arvada, Lafayette, Broomfield, Erie, Thornton, Northglenn, Longmont, Frederick, Firestone, Dacono, Littleton and many more places! Several of these builders are offering rate buy-downs for the full 30-year life of your loan. Recently, I have seen builders offering rate buy-downs costing $30,000 to $40,000. Additionally, they are negotiating on price - something we haven’t seen in our market for quite some time! Builders are just as or more motivated to make it through this paralyzed market as you, so they are making home buying accessible, even in this challenging market.