The huge drop in interest rates yesterday may begin to work against you!

So many buyers have been absolutely determined to drive down their offers for maximum benefit that a certain mindset has evolved. Some buyers feel all powerful in this market, waiting for the most and best, absolute and rock bottom deal – but the pendulum may start to swing back.

Other buyers (I suspect quite a few) have been waiting on the sidelines, waiting for the “right time” to buy a home because they’ve been concerned with falling prices, the economy, job security, etc. Like a dam holding back the river, these people are waiting for something to shake them loose, and this plunge in interest rates may break the dam.

Historically, interest rates and home prices work inversely – that is, if interest rates go up, home prices go down. If interest rates go DOWN, home prices go UP.

The first question a buyer will ask is, “How much will the price go up on the home at 123 Main Street that I want to make an offer on”?

Good question, but the wrong question, because the answer is much more nuanced than that. The principle I just mentioned is a macro principle and the buyer’s question is a micro question.  Was the home priced right to begin with? We’ve seen many homes (primarily REO properties) this summer that have had multiple offers.

A look at the real estate pendings (compared to last year) will show extremely strong numbers (compared to what one hears on the media for the nation as a whole). I believe there will be a strong possibility that these “sidelines waiting people” may jump into the market this fall, strengthening prices and competing with you for that home at 123 Main Street. We may see a “boomlet” market.

My advice? Know values! Don’t assume you can offer less than the asking price. Have your financing completely ready to go. Then you will feel enabled, confident and empowered to enter the marketplace!