Bargain Obsession Costs Buyer $200,000
I have blogged numerous times about a client we had who was obsessed with getting the absolute best deal on the planet when it came to buying a house.
She at first refused to buy at all, waiting for the market to “bottom out.” When she did finally start to make offers, she low-balled everyone and nobody would accept her offers.
The agent who referred her to us finally gave up on her.
The client returned to us two years later with a new agent, but the market had appreciated 20%.
She was completely priced out of the neighborhood where she originally wanted to buy too.
Long story short: Her obsession with “getting a deal” cost her $200,000.
Institutional Money Waiting To Buy Residential Property
I thought of that woman when I read these comments in Leonard Steinberg’s Compass Blog: “About $110 billion of Wall Street money is sitting on the sidelines waiting to buy up residential property at a discount as many assume a recession and job losses will trigger ‘opportunity buys’……. OPINION: alert any buyers now that are seeking to ‘wait-and-see for coming bargains’ in this under-supplied homes market that they’ll have stiff competition with this much capital (cash!), and their chances of really deep discounts are slim at best. (WSJ)”
Here is an article discussing that $110 billion – enough “to purchase 400,000 homes.”
While all too many people are waiting for the market to correct, most of us “inside” the real estate and mortgage industries know that inventory is not piling up like the media would have us believe.
This is something I have addressed in several blogs including this one: It’s The Inventory…
But Leonard’s point is that even if bargains do surface, the institutional money will snap them up.
Two Other Factors Propping Up The Market
While I agree with Leonard’s point, there are two other factors that will also prop up the market and prevent bargains from surfacing at all.
1. Lower interest rates. We saw a very surprising surge in business in late November that was largely prompted by a drop in interest rates, reminding us just how much rates drive homebuying activity. The majority of economists and CFOs are predicting a recession this year. And given that recessions almost always result in much lower rates, it is likely rates will fall much further – bringing that many more buyers back into the market.
2. The spring buying season. Spring buying season will also soon be here, and that too will bring a lot more buyers back to the market. Yes, there should be more listings to offset that demand, but so far, the big “surge” has yet to surface.
CoreLogic Data: 2.8% Appreciation Over The Next 12 Months
CoreLogic recently released its November housing report, showing that the market still appreciated 8.6% year over year in November.
It also showed that the market has corrected from its peak, but it is only down by 1.8% – a far cry from the “30% crash” that so many media pundits have been predicting.
And, once again, CoreLogic is still predicting 2.8% APPRECIATION over the next 12 months.
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