July 20, 2016 by Jeff Lowen
Calling all agents…
In case you’re preoccupied, did you know the housing market is steamy hot these days? Prices are rising as the demand for quality housing far outpaces supply in almost every region.
But wait a minute!
When it comes to luxury real estate, things are quite different. No, they’re very different. In the upper-end market, inventory is plentiful in most locations. That means lots of choices.
For that reason alone, prices haven’t skyrocketed as they have in the lower and mid-range markets. Along with great mortgage rates, Um… That means buyers can get way more bang for their hard earned buck! So, do I have to tell you this may be the perfect time for them to purchase the luxury property they’ve always wanted? Of course not.
To spell it out a little better, let’s break it down into the three major reasons you can help them to act now:
1. There are more homes to choose from
According to a recent Wall Street Journal article, inventory in the upper end is increasing, while it is decreasing at the lower and mid-ranges. Here is a graph showing the average increase and/or decrease in inventory for the first four months of this year as compared to last year:
2. Prices are becoming more reasonable
In a separate article, the Wall Street Journal also talked about prices in the luxury market. They explained that downward price adjustments have been more common in the luxury market than in markets with lower prices. They went on to say:
“The growing number of price cuts suggests luxury home sellers are becoming more realistic about property values as sales have slowed, said several real-estate veterans.”
Not only will you have more to choose from, but you may also be able to get the property at a reduced price.
3. Mortgage rates are at historic lows
In the past, one of the drawbacks to purchasing a luxury property was the larger mortgage rate on “jumbo” loans which are often required on high-end properties.
However, HSH.com just revealed that jumbo rates just set new record lows:
“While conforming fixed-rate mortgages eased a little this week, 30-year fixed-rate jumbos declined enough to break into new record low territory (3.66%), besting the previous low set in April by two basis points.”
The moral of the story…
All this is well and good and easy to digest if you’re in the business; however, how can you articulate this (and your value) to your clients? Here are some ideas.
- With more choices, the configuration of the home they want is more apt to be available. C’mon, who doesn’t want more choices?
- With more inventory, that means less competition to get your offer accepted. ‘You don’t want to overpay for your home, do you?’ We all know what happens in a multiple offer situation. That’s not the case with more inventory.
- This goes right into how more inventory puts pressure on sellers to be more reasonable with the list prices. For example, statistics in the Virginia, DC, MD, WV & Delaware region, the average list price to sale price ratio is 89%. That’s a whopping 10+% discount right from the start! Did you hear that??
- 10% off the list price! That’s a great place to start a negotiation, huh?
- Mortgage rates are easy. The average luxury buyer is a little more savvy to the time value of money and explaining one’s ability to buy a two million dollar home for the price of a million and a half one, should the interest rates inch up a couple points -with the volatility of an election year- is something we all can sink our teeth into!
More choices, better prices, and historically low mortgage rates may make this the perfect time for your buyer clients to own one of those luxury properties they’ve always fantasized about.
Now go find some luxury clients! Believe it or not, many agents are afraid of luxury clients because of the large money. There’s very little competition there, too, because of that reason alone. Here… Let me help. What’s the difference between a $100,000 home and a $1,000,000 home? Answer: 0. That’s right, zero, nothing, nada.
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