Here’s a truism: Escalating mortgage interest rates freak out potential buyers and sellers. Especially those in the younger age brackets who have only known the low rates we’ve enjoyed over the past several years.
And, it looks like money may become even more expensive to borrow in the near future, at least according to some economists.
How this is impacting real estate professionals
While we hope that you haven’t been a party to a canceled real estate deal, many agents have. In fact, in July, “… 63,000 home buyers backed out of purchase agreements,” according to a Redfin study.
That represents more than 16% of pending contracts, “… the highest share since March and April 2020,” according to Kaitlyn Koterbski at Fortune.com. She goes on to blame “… higher mortgage rates coupled with high prices” as the reason that many buyers have chosen to wait for a better time to buy.
What’s an agent to do?
Now, more than ever is the time to nurture prospects through your pipeline and to encourage anyone in your CRM that has even a smidge of motivation to buy or sell.
Remember, they are most likely getting their housing industry news from mainstream media. To counteract the clickbait and negative Nellies requires that you become more accessible to your sphere of influence. Increase “reach-out” frequency with positive information and answers to the questions that are most likely plaguing them right now.
Hopefully, you’ve made note of how each person in your sphere prefers to hear from you, be it by phone, text, email, or direct mail.
Concentrate on current homeowners, not first-time buyers. The former will have more cash to buy another home, while many of the latter, what’s left of them in the market, typically don’t have a lot of cash on hand and are struggling with finding a decent mortgage rate.
If you have no idea how they like to be contacted, stick with direct mail. It’s the least intrusive method, and it’s also more likely to be seen by the recipient.
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What should I say?
Think like someone who wants to buy or sell but is taking the negative housing market news to heart. Give them some positive news.
Educate them on the various aspects of buying and selling that they may not be considering.
- Interest rates are higher than they have been in the recent past, but historically, they’re still low. A lot of us can remember when a 6% mortgage interest rate was cause for celebration. “Historically speaking, we are still on the lower end of the interest rate environment,” according to Jon Reed at Time.com.
- Explain to members of your sphere that it’s not wise to try to time the market. By the time it changes, it may be too late to get what they had hoped for in their home. Buyers who try to time the market may be faced with even higher mortgage rates.
- “High prices and higher mortgage rates have slowed down the pace of how long houses stay on the market, which opens up supply,” according to Lindsay Moore at MLive.com. Buyers will be facing a more relaxed market, which should encourage those who can afford to buy to get out there and look at homes.
- Renters. Now that is one angry group of Americans. The eviction moratorium is a thing of the past, and rents are rapidly increasing. Now, more than ever, tenants are wondering if it’s cheaper to buy a home instead of continuing to rent.
Crunch the numbers in your market and decide if it’s better to buy and send postcards targeted at renters or property flyers to middle-class and higher-income renters, urging tenants to beat the rent increases and start paying a mortgage, not their landlords.
If you’re a seasoned agent, the state of the current market is nothing you haven’t dealt with before. For those agents who are experiencing their first market correction, however, understand how well the basics of marketing will serve you right now.
Think like your potential clients and serve up some knowledge and advice. Consistently.
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