Ask Cora
Hey Cora, Can we get a market update? I know that things aren’t moving quite like they were. Why is that? I thought lower interest rates would help. Signed Curious George (but not the monkey)
Dear George: well real estate is an ever changing “living” thing it seems. So many factors that all get rolled up together, kind of like a cinnamon roll with 20 different things inside! Let’s try and break this down so that we have a better picture of what is happening.
1) Supply and demand: We all know what this is, Economics 101, how many people want the product vs. how much product is available. Right now, we have a little more on the market than we did say 2 years ago. This means that it’s taking a little longer for the buyers that are out there to make a choice as to what house they want to purchase. As some sellers are more aggressive in their pricing, lower the prices quicker because of job commitments, or other life factors, creates opportunity for buyers. Those are the ones to watch for. Keep an eye on supply and demand and as a buyer, this is where you can find a great opportunity.
2) Interest rates and financing options: We all know that interest rates have been a real thorn in the side of the real estate market in the last year and a half. Never in the history of home lending have we seen interest rates rise as quickly as they did in a 12 month cycle. It’s unprecedented. This one factor kicked out a huge amount of home buyers from the market. So what happens next, you guessed it, supply and demand. Less people can buy or invest because the rates have made it impossible, therefore, more homes for sale on the market. There are still financing options out there for people that are in low income brackets. Grant programs, interest rate reduction programs, all kinds of things, but these programs qualify the buyer AND the property. It’s kind of like all stars aligning to make this work. But it does! You just need a guide to help you through this and that’s why you have me!
3) Credit scores: Many people didn’t fare well though the whole COVID mess and it really impacted their credit scores. This makes it much harder to buy a house, yet not impossible. Here are some tricks to get your credit score back under control
a. Pay off your credit card balances to 1/3 of the credit limit. ALL OF THEM. So if your credit limit on one card is $9000, pay off that balance to just below $3000. This will seriously increase your score. It shows that you can “handle” credit. Keep it there, don’t go over the $3000, pretend that is your credit limit. This may take some time to get there, but it’s worth it.
b. Car payments are a mortgage murderer! I know, we all love our cars, and in Alaska we all need a dependable car/truck with a good heater! But huge car payments will drastically cut into your home buying budget, I mean it could actually throw you out of the market completely. Before you buy a car on credit, use these rules: put 20% for a down payment, do not finance for over 3 years. If you cannot afford this down payment or the car payment for 3 years, you cannot afford the car. Sorry if I sound like your mother here, but if you are serious about purchasing a house, you will have to either refinance your car, sell it and buy something less expensive or drive a reliable junker for a while. Sorry, I know that’s not what you wanted to hear.
c. Other consumer loans, like furniture, snowmachines, razors (you know what I mean, the 4 wheeled kind). Those will stand in the way of you buying a home. I know, they are fun and you can have them, you just have to watch how many loans for that type of thing you have. One is fine, 2 is pushing it and 3 – no way!
4) Election Uncertainty: Republican, Democrat, Liberal, Conservative, Libertarian it doesn’t matter what your political persuasion, presidential elections are always stressful and uncertain. Because both sides are bashing
each other so publicly and so brutally, we get a picture of our economy, our national security and a negative view of our leaders – which causes uncertainty. Who wants to go spend huge amounts of money in a cesspool of blame, mistrust, and greed for our leaders. It just puts us all mentally on edge, even if you are not a political person, the words are still there, the advertisements are still on TV or online, the podcasts are still pontificating! This throws negativity in so many different directions, and one of those is home buying. October in an election year is typically slow, typically hesitant. So if you are a seller right now, don’t expect an offer until after the election.
5) Negative migration: Right now, Alaska is experiencing negative migration which means that more people are leaving the state than moving here. This takes our workforce, and plants it in another state. Not good for us, as we already have a hard time with skilled workers. There is nothing that you can do about negative migration, it just is. However, this does create opportunity for buyers because what does it affect... oh yes, supply and demand! You guessed it! This put more homes on the market, creating more supply, less demand and better options for buyers.
Now, you have what you need to understand the market and how to gain the upper hand but why should you buy? Here’s why, six years ago I sold a house to a young couple with 2 kids. They used some of the programs for low income families that we talked about earlier. In that 6 years, their income increased, they had 2 more babies and house values went up. They are ready to purchase a larger home for their 4 kids. Because they maintained their current home, made their payments on time and took pride in their ownership, they can now afford a larger home for their growing family. Because of the EQUITY they gained in those 6 years, they are able to put over 20% down on a new home, and have cash left over to pay off some debt AND put money in savings. What? You say... all true because they bought, they managed, and they succeeded in their goals as homeowners And you can too.
So call me and we can schedule an appointment to sit down, go over your financial and real estate goals and get you to where you want to be.
Kids! Send in your coloring contest entry for a chance to win an 8” cake from Dairy Queen! One winner from each age group 4-6, 7-9 and 10-12 will be announced in the December 2024 Greatlander.
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