Have the First Time Homebuyers Lost Their Mind ?
In the past week, a number of bizarre things have happened related to some decisions from First Time Homebuyers in the Philadelphia market. In the real estate world, they are not that weird to us as we are relatively numb to it as these things happen frequently when folks get "cold feet". However, when you take a step back and wonder what some of these First Time Homebuyers are really thinking and see the opportunities they are missing if they do not pull the trigger on something, I have to wonder...
Or are they not being educated by their buyer agents ? Maybe we are fortunate as we have thoughtful discussions with our first time homebuyer clients as the vast majority of them go under contract and purchase without a lot of these dramas below.
Here are some examples - we are on the listing side for all of them (none worked out to a deal):
- Buyer submits an offer in writing and next day changes their mind. Buyer agent claims "defies understanding"
- Agent claims buyers are going to submit an offer over and over again "this is the one !!! " only to have the parents come and snub the deal. "It is too big for them."
- Buyer agent does not explain seller assist fully on another deal that was agreed upon after days of negotiation. Buyers want to renegotiate. Also showed the property for the buyer agent to her buyers since "she was too busy".
- Buyer submits FIRM 79 percent of the listing price offer on a below market new construction property.
- On another offer for new construction, 81 percent of the listing price and we just sold one right next door a month ago for $50K higher that is the same property
Note: 2 of the above have already been sold to new purchasers
What is going on especially when you compare this year to last year ? Remember last year with the First Time Homebuyer Tax Credit ?
Buyers were paying up, the inventory was much lower than it is today and the interest rates were a point higher ! And there was a MAD RUSH to get $8,000 dollars.
Now if only buyers could see the big picture. They have SO MANY more properties to choose from, prices are lower than last year and the biggest factor of all is that mortgage rates are a point lower. What does that mean ? Well basically what it means is that there is a heck of a lot more savings than $8,000 over 30 years to buy now than last year. For example, on a $300,000 loan balance at 6 percent last year the interest over 30 years would have been approximately $347,000 whereas at 5 percent this year the interest will be approximately $280,000, a savings of $67,000 !
What would you rather have - $8,000 stimulus or interest savings of $67,000 on the $300,000 home ? Of course it will be more on a higher priced home and lower on a lower priced home.
Congrats to the buyers that have taken advantage of the opportunity or who are under contract or who will be. If you are on the fence, get over the fence ! So if you have lost your mind temporarily and are consumed by fear, take a step back, see the big picture (give us a call if need be), smile and move forward. You will be thanking me in five years.
As a testimonial in regards to personally being bullish on the local real estate market, I recently purchased two properties for investment purposes, one in Old Kensington and one in Fishtown.
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