Remember the 2020-to-first-half-of-2022 market when many properties had multiple bidders, many anxious to redefine pricing by placing offers over - and often well over - the asking price? The more prices rose, the more people wanted to buy and acted on it. The current markets we're experiencing around the country vary considerably. Still, one common theme emerges: buyers seem much less willing to step in to make offers now, even though conditions are the best they could ask for in years! Buyers can define market pricing, but the current pricing is to their advantage (the buyer) this time, not the sellers'.
The practical reality of higher interest rates is that many can now afford to buy less of a home than before. So why, when rates were super-low, were they comfortable making offers well over the asking price? Why were they so comfortable doing so knowing how competitive things were, often competing with multiple other bidders? And often on homes in areas they liked but did not love.
In today's markets, buyers' most significant advantage in creating pricing (something buyers always do) is that there are fewer competing buyers in most areas. These days the opportunity allows buyers to establish lower pricing. In the 'old' market, you were competing against many. These days fewer people are bidding. In this market, sellers - and their agents - have little idea how much pricing might drop and for how long. Prices may go down. Prices may even go up in some areas. But without bidders, sellers and their agents have zero insight into what the market will bear. I've witnessed this moment often where buyers can create and define markets and pricing. Just like they do when markets are super-heated, but the pricing then is bid up to the advantage of sellers. If the herd only wishes to bid things up, maybe now is the ultimate buying opportunity whereby fewer data points (no other bidders) help buyers define a valuation that's beneficial to them more easily.
More importantly, this 'opportunity moment' shall pass. It always does. When - not if - rates come down from their exaggerated, speedy escalation, those on the sidelines will awaken and re-enter the fray. And because we have a herd mentality, that re-entering and re-awakening could be robust. It may be even as extreme as the 2020-to-first-half-of 2022 market when everyone realizes these high rates have cut back construction in an under-built environment, and pricing could surge! Those who buy now at high rates may have an opportunity to refinance at lower rates, triggering even more savings beyond their negotiated purchase price. The high rates we have now are exaggerated to cut inflation rapidly. Just like super-low rates have their purpose, these exaggerations are almost always brought back to reality.
Maximum benefits are always achieved during moments of imbalance between supply and demand. Right now, the markets in most areas are skewed to the advantage of the demand side; buyers. Those who recognize and act on this will look back with great accomplishment. They will be richly rewarded due to choice, a focus on quality, the ability to negotiate with less or no competition, and fuel 'savings' by refinancing later. Attending an auction without other bidders is almost certain to deliver an excellent price. This singular, brave, independent thinker acts in advance of cycles and doesn't follow the herd!
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