The last couple of years haven’t been the easiest on homebuyers in Houston. Sure, interest rates were at an historical low, but the demand from buyers capitalizing on those low rates drove the market to become shockingly competitive, forcing buyers to make offers well above asking price. Add in supply issues and high demand for consumer goods across the board, and our economy simply couldn’t keep up.
In early 2022, the government stepped in, and the Federal Reserve raised their rates in an attempt to stabilize the economy and, in short, we are now seeing interest rates higher than they’ve been in well over a decade, currently sitting at just above 7%. Yes, sellers might be feeling a slight sting, but buyers continue to bear the brunt of the consequences – first in competing with multiple offers and now being forced to pay higher interest rates.
But if you’re still ready to buy a home in Houston, all hope is not lost. Here are our top three nuggets of truth as you continue your search for the home of your dreams, despite a high-home value, high-interest rate market.
Sellers Don’t Want to Wait
A “normal” market – which means that it is neither a buyer’s nor seller’s market – is one in which there is approximately three months of inventory available. This means that it is perfectly normal for a house to sit on the market for three months before going under contract without succumbing to price decreases. If you’ve been searching for a home within the last two years, this probably seems crazy. Of course, the most desirable homes are still selling within a week or two, but many perfectly good homes are starting to see 30+ DOM (Days on Market) and sellers aren’t used to it.
This is good news. Sellers are ready to capitalize on their appreciated value and they don’t want to wait, which means now you can negotiate. Your Steel Door agent will help you understand all the terms in your offer and identify ways in which you can get the best deal on your new home purchase. Some things you can negotiate with sellers? Term of your option period, seller-paid title policy, home warranty, and other closing costs, non-realty items like furniture and decor, and even your interest rate!
Using the 2:1 Rate Buy Down
Did you know that one of your negotiating tactics with a seller could be in getting them to buy down your interest rate? That’s right! Once you are pre-approved for a mortgage with your lender and you find the home you’re ready to submit an offer on, you can actually negotiate with the sellers to help you buy down your interest rate.
Depending on your financing options and the price of the home, sellers can actually contribute their own money to help you lower your interest rate by about two percentage points. Now your 6.98% rate becomes 4.98%! Talk with your lender about this type of offering and then your agent can be your master negotiator in crafting this option into your offer.
Slightly Adjust Your Own Expectations
This might be hard to hear, but you can’t time the market. You might get lucky, and data does speak volumes, but in the end, nobody can predict the future. According to HAR, housing data in Houston shows a slight slow down in home purchases, but not an altogether halt. Buyers are still out there, and sellers are still ready to move on. With rising interest rates, we’ve seen buyers become pickier than they have been in recent months, and that is fantastic! However, expectations must still be managed. Depending on your budget and timeline, you may have to adjust your requirements. Can you find an amazing home that may need a small tweak or two to make it perfect? Absolutely – and we’re here to help you do that! As real estate professionals in Houston, we know that the most desirable homes move quickly, and we know the trends that are currently at play. We will identify those pockets of homes that fit your criteria and help you visualize what it takes to fit your dreams. We are armed with the most professional and reliable contractors, plumbers, electricians, and roofers in the Houston area.
If you’re ready to buy, but a little spooked with recent housing trends – let us take you to lunch to discuss the real truth behind what’s happening in Houston, and specifically in the Houston neighborhood you’re searching. It’s not just about selling homes – our goal is to educate our clients and help them build wealth through real estate!
Contact your Steel Door agent today. Or email us at Hello@SteelDoorRealty.com and we’ll put you in touch with an agent that will fit your needs!