Finding Opportunities in an Uncertain Market

If you're a flipper or seller looking to sell at the peak of the market, this probably is not the best time for you; however, if you're a buyer looking to get a deal, this is a phenomenal market. In fact, this is the market that most buyers have been waiting 10 years for. There's a strategy for maximizing these types of opportunities, and today I’ll share them with you.

The first thing to note is that you should buy when prices are low like they are right now. Second, you need to refinance when rates improve, which could be anywhere from one to three years. I don’t have a crystal ball, but statistically, things will likely normalize in the next one to two years. The third one has to do with profit. When the market last softened in San Francisco, just after the mortgage meltdown, we saw a five-year housing slump—prices bottomed out and there was panic everywhere—it was terrible. This market is nothing like that market, but there are lessons to be learned. 

Between 2007 and 2011, the median sale price in San Francisco dropped 21%, but it only took two years to fully recover and exceed the previous high. Those who purchased in 2014 when the market was showing signs of recovery saw 100% growth in 10 years. As for those brave souls who purchased two years earlier, they saw 164% growth. I don't know anybody who regrets purchasing in 2011. Today, there are some strong buying opportunities too. The median sales price in Q3 is down about 16% from Q2 this year, which is a significant discount. 

"There are many strong opportunities for today’s buyers."

Interest rates at the end of September were around 6.29%. Now, they're about 7%. Also, the yield curve is inverted, which means investors think the risk in the short term is greater than the risk in the long term. That is because of market uncertainty. Whenever this happens, a recession is highly likely. Now as twisted as this sounds, a recession is good for interest rates. With reduced economic activity comes higher unemployment rates, then mortgage demand falls further which puts downward pressure on rates.

We're not hoping for a recession by any stretch. However, if you’re a buyer looking to buy when prices are low, it's pretty helpful to know how long you're going to have to stomach a higher interest rate before you can refinance into something a little more comfortable.

If you've been considering buying but have been talked out of it by the headlines, let's talk. We have tremendous negotiating leverage right now for price and terms. Many sellers are offering incentives to help buy down the interest rate to make it a little easier for buyers. You may also be able to get credits from sellers to reduce your out-of-pocket expenses. If you have the cash, you're in a phenomenal position to buy, and you can protect your money from inflation while taking advantage of the option to refinance later when rates are lower. 

Remember, Einstein once said: “In the midst of every crisis there is opportunity.” So be like Einstein, let's go buy a house together. If you have questions about your real estate plans or anything at all about this topic, call or email me. I’d love to connect with you!