Most buyers over 30 years old have not seen interest rates under 5%. They’re getting sticker shock, they’re getting apprehensive about paying too much for a property and paying too much for a mortgage when the reality is that in the last 20 to 30 years, the average rate for a mortgage is around 6%.
We’re going to show you how we train our agents to handle these objections to talk to them about what is an average interest rate, whether you should wait to buy your home or should you get off the fence and buy now.
Buyers Don’t Understand Historical Rates
Most buyers have never seen rates below 5.5%. If you’ve been in the know, for seven years, then you haven’t seen anything above that. Should you buy right now? It depends on your situation. If you’re gonna buy and move a year later? Probably not. I don’t recommend anyone in any market, to buy a home for under three years and that’s it, best case. It’s five years.
Buyers and sellers are going to ask you, is it a good time? How are you going to approach that question? Usually, the best way is, with questions so you can figure out what is it that you’re going to talk about and what is it that you’re going to help them plan for. That’s why it depends on your situation. Everybody has their own unique situation at this day and time, their own economic process, their business planning, whether they’re buying a home, they have all their things going on.
Should Buyers Wait to Buy a Home?
Someone might ask you like, how’s the real estate market? Well, it depends. You know, don’t reply, “oh, it’s crazy!” Everybody knows that and changing your words to help you add a little bit more value than what everybody else is saying is going to help you. It depends if you’re trying to buy a home, sell a home or invest. Once I know a little bit more about what your goals are, I can tell you if now’s a good time to buy a home.
If you’re open-minded, meeting with me and talking about your goals in the market, I can show you exactly what’s going on in the market and figure out if now’s a good time to buy. I haven’t even started asking them too many questions, but just letting them know like, it just depends like it might be a great time for you right now. Maybe in six months, but if we meet, get together, and talk about what your goals are and why you’re asking this question, I can let you know if now’s a good time or not.
How long are you planning on living in the home? If you’re planning on living in this home for one to three years, and you’re trying to figure this out like you’re not going to be making any money. This is what the people are fearful of, do I buy a home now? Is the market going to crash right after I buy a home and then for five years, I’m sitting in a house where I’ve got no money, that’s never going to happen.
You can tell people that in the past five years, has real estate gotten cheaper or more expensive in the past 10 years, 20 years, and 100 years. Has real estate gotten cheaper or more expensive? In five years? Do you think it’s going to be cheaper or more expensive? Just ask them that. If they think it’s going to be more expensive, talk about that.
Talk about what their fears are. “Oh, I think the markets going to crash.” “Great. Okay.” “What do you think prices are gonna go for this $600,000 house?” “You think you’re in the $600,000 price range?” “What do you think it’s going to be worth in a year?” Have them answer that question.
It’s really uncomfortable when you have to sit there quietly when you ask a question, but you need that answer. In sales, he or she who speaks first loses. You ask a question. You gotta let them answer.
Understand that real estate’s a long-term investment. I can say in a five-year period, but really like you can say like there has been no time in real estate that someone has said they’ll just wait and you’re gonna end up saving money or if they did look back and did you end up saving money.
Seasonality of the Market
This goes to timing. Things are already slowing down. I’m trying to time it out a little bit better. Well, what’s happened is really interesting in this in our market this year.
Some of you have heard of the seasonality of the market and the seasonality of the market is a very real thing because there are different people in the market buying and selling homes. We usually see a shift from August to October. What happened in our market this year in April, everything started to shift with interest rates, inventory starts to spike, and now we’re getting this prolonged depression and now we’d hit our normal seasonality of the market.
What do you think’s going to happen in the spring? How long do you want to wait until the spring to buy real estate in Austin? Do you know how many people still have to move here? Or did you plan on competing with 10,000 other people who aren’t yet here? I know you want to wait.
You know how many other people are waiting to move here. Yet still, all these buildings in town that aren’t built? There’s all everybody’s still moving to town. So how long do you want to wait? And how competitive do you think it’s going to be moving to Austin in a year or two?
You can talk about prices and you can have different flyers and talk about interest rates. I haven’t talked about that stuff yet. That’s later, when they say your interest rates, go talk about interest rates, they say prices go talk about prices. But right now, there are going to be hundreds and thousands of people moving to this area in the next few years and you’re going to be competing with every one of them.
Those that try to time the market are always going to lose. Now, if we’re having this conversation now, like whether you’re an internet lead or someone that you’ve met at an open house, there’s something about the market that you’re interested in. What is it about the market that you’re most interested in right now? Why are you asking me this question? These give you these conversation points.
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Consulting with Data
Our Spyglass Realty Sales Manager John McCarthy took a call last week from a guy that want to get off the phone with him in the first minute. He handled just about every single objection you could possibly. The call lasted for 20 minutes and ended with an appointment with one of our agents where they’re showing property now. The guy was like “I’m not ready to buy now.”
We used data and a neighborhood called Blackhawk just because we wanted something that had very similar homes, not something like in Zilker with 50 different types of builds. In the image below, we have houses with different square footage and prices in the last 30 days.
Presumably, those homes have gone down in the last three months, and presumably, they may go down again in the next three months. But they’re not going to go down to where they were.
Having this data and being able to talk to buyers, and talk them off the fence is basically what it’s all about. You got to educate, consult your people, and get them to do what needs to be done. Because I believe that this is going to be very short-lived.
Timing the Market Rarely Works
I don’t know anyone that has ever won by trying to time the Austin market. Right? Is the market gonna get lower? I don’t know. But I know it’s gonna go higher. You need to be able to have these conversations because people are scared right now.
You got everything going on with the news, the economy. But the fact is that this has historically been an amazing market. We have the best job market in the world and it’s gonna be okay.
Historical Data on Mortgage Rates
From 2013 to 2017 these are the only time in In the last three decades that the interest rates have been below 5%, then it’s 5.9 and 6.2. You know, people are worried about interest rates, show them what it’s been, are we going to see 3% again? Probably not. You know, I’ve never seen it in my lifetime.
Educating your buyers, set your expectation, and letting them know everything you know, based on history is what’s going to get them off the fence. That’s it.
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