Last week, I heard the episode On the Market “New Low-Interest Mortgages Are on the Way for Investors (How to Get One).” I was ready to learn the secret to getting a lower rate—and surprise, surprise—three lending pros had some thoughts based on the market, but they had no crystal ball for exactly what the rest of 2023 would hold. Rates will be
There were three quotes from the podcast that stood out to me as a buyer’s agent and investor:
- Christian Bachler, The One Brokerage: “Volume, just on a grand total, is down. But volume per investor, if that’s a metric I can use, is certainly [up],
- Bill Tesser from CIVIC: “I’m really bullish on real estate, short and long term. I think you can get a better deal today than you could six months ago. You can negotiate a little, you can ask a little more.” You’re not paying more than list price. You’re getting contingency on your deals. You’re getting seller concessions on points. You’re getting all of that. Perfect. That’s why I’m excited about real estate. Am.’
- LendingOn’s Matt Neiser: “The one thing I would say to borrowers [that] I tell myself if I try not to bet on interest rates.
my takeaway
Smart investors are buying more properties in our current market. They are buying more because there are good deals to be negotiated now. They are not betting on interest rates, but are excited to bet on getting good deals on early purchases.
The rate can always be refinanced at some point down the road. You can negotiate a lower purchase price, concessions and repairs only once.
I’ve seen this ring true in my own business, being able to negotiate hundreds or even thousands of dollars in price reductions, concessions and repairs for my customers in our current market. Your favorite BiggerPockets host also says he hasn’t seen a better time to buy good deals in years.
I’m always talking with buyers and investors, and many of my conversations over the past few weeks have encouraged buyers not to wait for rates to go down before looking for a property. Right now, there is a buyer window that I don’t want myself or my buyers to miss.
In Denver, Colorado, we haven’t seen a buyer’s market or arguably a balanced market in the last 10 years. The last six months have been the first time in a long time when buyers could negotiate with sellers and get great deals. Yes, the interest rates aren’t looking good, but you can negotiate a 2-1 buydown to help make the monthly payments not as bad as the first two years, or you can wait for a refinancing opportunity.
Here’s why you don’t want to miss the buyer window: buyer demand is still there, and it’s not going anywhere.
Here’s my theory. As rates move to the low 5s or high 4s, all buyers who didn’t buy during the low interest rate period or who have life circumstances that lead them to buy another home will be back in the market, Especially markets where there are good jobs and population growth. High or low interest rates, the demographics of our country remain the same. Millennials, the largest living generation, are in their prime home buying years. The demand for home buyers is present and will not be going anywhere anytime soon, especially in places where people want to live and have good jobs.
Along with traditional buyers, many Wall Street-backed investment funds held out after the interest rate hike. When rates go back down, you can bet that these funds that already have established partnerships and infrastructure will be in a good position to jump back into the market if there is money to be made.
Higher mortgage rates have put the brakes on demand somewhat. Although inventory has increased everywhere, it can be easily wiped out if buyer demand increases, creating a more aggressive seller’s market. If and when that happens, we’ll say goodbye to negotiating prices and concessions on most homes.
Real estate is cyclical. Outside of artificially low interest rates from 2020 to early 2022 causing demand to essentially stay on the rev limiter throughout the year, there is usually a regular cyclical pattern to buyer demand. People have New Year’s resolutions and a shot of energy with the new year. We almost always see an uptick in activity in January after the holidays. As highlighted by, we see that now to play increase in mortgage applications In January. Like people going to the gym, demand tends to drop off as people settle into a New Year’s routine. In April, the weather turns pleasant, and people start planning for summer and what they’ll be doing when their kids are out of school. We see the highest buyer demand during the spring and summer, and it tapers off in the fall/winter as people come back from vacations and kids go back to school, and the cycle repeats.
There is almost always a smaller buyer window in the winter for people to find better deals because demand is lower. This window is better this year as our high interest rate environment has reduced demand even further leading to more inventory, more days on market and, therefore, increased buyers’ ability to negotiate prices and discounts.
final thoughts
Once demand picks up in the spring with the regular real estate cycle, deals will be harder to find. If this is combined with low interest rates, it will become even more difficult to negotiate prices and terms. we know there is a buyer window Now, and we don’t know when this will end, so I’m encouraging buyers to act, not wait. We can’t predict the future, but we do know that good deals can be found in our current market.
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Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
