There’s a change in the air, and no, I'm not talking about the weather. My intent here is to talk about another change. Our market has continued to gain value in home pricing over the last year, but is still significantly lower than if we were in a “normal” market. (By the way: that is the ONLY time I will use the word “normal” in any reference to real estate.)
So we have a situation, great equity potential in purchase amounts, super low interest rates, and we still have low down payment loan programs (0.5%-5% down). Here’s a great example of how low rates are:The average interest rate in the 90’s was 8.0%. On $180,000 sales price, $144,000 loan amount (20% down payment) the monthly payment would be $1056.62. Today, the same $180,000 sales price and $144,000 loan amount at 3.375% interest rate creates a monthly payment of $636.62.
This has created something we haven’t seen in quite awhile, low inventory.
Yep, there isn’t as much to choose from. The idea that foreclosures are a top option isn’t so anymore, either. I get a call at least once a week asking about the vacant house down the street from the caller that has been empty for two years. Sure, it’s foreclosed, but it’s not for sale. Why? There are many reasons, many guesses, many conspiracy theories on that one. Mostly, it's a process that has taken years to streamline since the process became unexpectedly necessary.
Here in Jackson County Missouri, only 17% of homes for sale right now are foreclosures. For the most part we are showing privately owned properties. Which leads to the next question I get at least once a week: what does Back-Up and Pending mean?
They both mean the house is under contract. The seller and buyer have signed and are working towards closing. Pending says, no more showings, looks good to close. Back-Up, however, says not so sure this will close. For several years now most buyers didn’t keep the Back-Up properties on their list of homes to see, because there were plenty others that potentially fit their needs.
Not so much now. We’re not only looking at Back-Up status homes, we’re writing Back-Up offers. When one is accepted, we anxiously wait. I call the listing agent after the current contract has made it through the ten day inspection period, if that goes well we wait to hear if the appraisal goes well, then we wait to see if it closes. If for some reason that current contract doesn’t make it to closing, my buyers offer becomes the new contract.
The other fantastic status actually isn’t a status, it can be simply frustrating. Verbally Accepted offer. This means the seller has been presented an offer from a buyer, and whether the offer was accepted via email, text, or a phone call, the bottom line is there are no signatures. Is it truly under contract? The answer will depend on who you ask. I can’t express the level of “bummed out” both myself and my buyer(s) feel when on the way to see a home or even writing an offer on a home when we find out it has a “verbally accepted offer.” We try to call the listing agent before showing to find out if there are any offers on the property but don’t always get someone on the other line. There are some great agents that put that information on MLS, or at least let the showing service company know the update, but it isn’t full proof. Not yet anyways.
Here’s the good news. There’s a renewed excitement in the air about home buying. The predictions for sales and values for 2013 are even better than 2012. So keep your hats on, every market has its roller coasters!