Elite Homes of Rockaway
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         Where Are The Buyers and Sellers????

           Many Sellers are asking that question. I have news for you. So am I! All signs point to a better economy. Owners are once again putting money into their homes to renovate and renew and real estate values are steady or rising. Confidence is coming back. With all this good news and low inventory, where are the buyers and sellers?
Let’s consider this. The one steady thing in the Real Estate Market for a long time has been low interest rates. Yes it was a shot in the arm for the economy and perhaps for buyers looking to get a piece of the American Dream. Yes it got sellers out from under crushing mortgage payments by refinancing and yes it helped stimulate the financial markets. But could it now be possible that this is what is keeping the market slow and the inventory and buyers at low numbers? I say YES!
After 30 plus years selling real estate I have seen a lot. Crashes, booms, lulls and natural as well as man-made disasters and yet the market came back. The big difference was interest rates. In October 1981 the interest rate for a 30 year mortgage was over 18%. Of course home prices were much lower but so was income. The slightest change in interest either way could generate more buyer and sellers or detract from the market. Today a $500,000 mortgage for 30 years at 4.5% is approximately $2,533 a month. If interest rates tick up to 5% would be approximately $2,684 - a difference of just $151. In the grand scheme of things not a big deal. Since the rates have remained so low for so long, Buyers are not being “encouraged” to move before rates and home prices increase and they can no longer qualify for a mortgage. Alternately, Sellers are not worried that rising interest rates will decrease the value of their homes or that fewer buyers will qualify for mortgages.
What this gives us is Sellers not willing to reduce prices before a rate increase affects values or reduces the buyer pool and Buyers who believe they have time to wait for prices to come down since rates are not going up. The bottom line is fewer Sellers willing to negotiate and fewer Buyers willing to go outside their comfort range.
The other less discussed problem is a lender’s will to make a loan. If they have a choice of making $50 million in mortgages for 30 years at 4.5% or using the same $50 million for credit card debt at 14% to 25% and more, annually, what do you think they will do? Now add that reluctance to the economic crash and that to the lack of Buyers and Sellers and you have this quagmire of a market. So what is the fix?
How about interest rates of 7% to 8%? When rates move up so will the action of Buyers and Sellers. It will make it necessary to pull the trigger now or lose out. And of course lenders will see their income rates perhaps double and we’re off! With all the action in the real estate market the economy increases as do salaries and more people are back to work. True or not, it makes for interesting conversation.

Lucille Peruffo
Lic. Real Estate Broker
Edward Weigert
Lic. Associate Broker