Don't Believe Your Lying Eyes: The Real Estate Market is More Than What Meets the Eye

What is 5+5

What is 9+1

What is 8+2

What is 20/2

If you answered 10 you would be correct -these are all the different ways in which we can get to 10. There is an indefinite number of ways we can get to 10. What does 10 represent? It represents Happiness, financial freedom, good health, and fulfillment. The problem that we currently have in society is that people only think there is one way to get to 10. 

Obviously, the number 10 represents a metaphor. This is irrelevant to the main point of the passage, which is that there are many different ways to achieve the things that are important to us in life.

As a Realtor, I want to address the current situation in the real estate market. Interest rates are currently around 8%, and there's a severe shortage of available properties. If you pay attention to the news, articles, and so-called experts, you might feel like the world is ending, and the concept of normalcy has been thrown out the window. But let's take a step back.

If you're considering buying a home, you might feel like hunkering down in your basement and never emerging. This caution might be justified, especially if you can delay your home purchase and live with your parents for a while longer. However, if you're itching to escape the nest and have saved up, here are some practical tips to consider.

First and foremost, it's essential to realize that life offers more than just a standard 30-year fixed-rate mortgage.

The National Association of Realtors is projecting a decrease in 30-year fixed mortgage rates to around 6% by the end of 2024.  Similar forecasts, in the 6% to 7% range, are being made by the National Association of Home Builders, the Mortgage Bankers Association, and Wells Fargo.

Considering this information, it appears we have at least another year to wait for potentially more favorable rates. For peace of mind, let's add an extra year, and we're looking at 2025. That might sound daunting, but it's not all doom and gloom.

So, what's the plan? Should you wait and attempt to "time the market"? Even better, why not consult with your lender? I have reached out to Tori Williams at American Financial Network for her expert advice. I wanted to explore alternative mortgage programs beyond the conventional 30-year fixed option.

Here is a brief description of just some of the mortgage programs Tori mentioned the different mortgage programs:

• 2/1 ARM: A 2/1 ARM is a type of adjustable-rate mortgage (ARM) where the interest rate is fixed for the first two years and then adjusts annually thereafter. This means that your monthly mortgage payments could go up or down after the first two years, depending on the market interest rates.
• 3/1 ARM: A 3/1 ARM is similar to a 2/1 ARM, but the interest rate is fixed for the first three years instead of two.
• 5/1 ARM: A 5/1 ARM is similar to a 2/1 and 3/1 ARM, but the interest rate is fixed for the first five years instead of two or three.
• FHA loan: An FHA loan is a type of government-insured mortgage that is available to borrowers with lower credit scores and down payments. FHA loans typically have lower down payment requirements and more flexible credit requirements than conventional mortgages.
• Negative Amortization: Although not my preference nor did Tori give me this one. This is a loan type characterized by monthly payments insufficient to cover the full interest amount due. Consequently, the unpaid interest is rolled into the principal loan balance, leading to its gradual increase over time. Negative amortization loans are often utilized by borrowers facing challenges in meeting the full monthly payments of a conventional loan. These loans can serve as a lifeline for individuals enduring financial hardships or those aiming to purchase a home exceeding their budget. However, it's crucial to note that negative amortization loans come with inherent risks, primarily due to the continual growth of the loan balance. Very Risky!

Which mortgage type is right for you will depend on your individual circumstances and financial goals. If you are looking for a mortgage with a low down payment and flexible credit requirements, an FHA loan may be a good option for you. If you are looking for a mortgage with a fixed interest rate for the first few years, an ARM may be a good option. It is important to compare different mortgage offers from multiple lenders before choosing a loan.

Let's Talk Buy-Downs

A buy-down is a mortgage financing technique where the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage.

There are two main types of buy-downs:

• Discount points: Discount points are a one-time upfront fee that can be paid to reduce the interest rate on a mortgage. Each discount point costs 1% of the loan amount, so buying one point on a $250,000 loan would cost $2,500. The number of discount points that can be purchased varies by lender, but it is typically between one and four points.
• Seller buy-down: In a seller buy-down, the seller of the home agrees to pay some or all of the buyer's mortgage interest payments for a certain period of time, usually one to three years. This can make the home more affordable for the buyer, especially in the early years of the mortgage.

Both types of buy-downs can save borrowers money on interest over the life of the loan. However, it is important to weigh the costs and benefits carefully before deciding whether or not to choose a buy-down.

Here are some of the pros and cons of buy-downs:

Pros:

• Lower monthly mortgage payments
• Can save money on interest over the life of the loan
• Can make a home more affordable

Cons:

• Requires an upfront payment (discount points) or the seller to agree to pay some or all of the buyer's mortgage interest payments
• May not be the best option for borrowers who plan to sell their home within a few years
• Can make it more difficult to refinance the mortgage in the future

If you are considering a buy-down, it is important to give Tori a call (631.764.6010) to discuss your options and determine whether or not a buy-down is right for you and which mortgage would work for you now. 

Notice That Opportunity Lurks When Others Become Lazy~

OK, We Have Mortgage options….. But there are still no homes

In the current real estate market, the saying "don't believe your lying eyes" takes on a special significance. This phrase suggests that appearances can be deceiving, and that's particularly relevant when it comes to housing trends and property availability. While you might see only a limited number of homes listed on popular real estate websites, the most interesting developments often occur off-market, meaning they are not publicly advertised or listed. 

Off-market homes can play a major role in shaping the real estate landscape for both buyers and sellers. Here's how these concepts are interconnected:

• Off-Market Homes' Hidden Opportunities: Off-Market homes are properties that are not listed on the Multiple Listing Service (MLS) or advertised through traditional channels. Instead, they are usually offered discreetly through word of mouth, private networks, or exclusive listings. Buyers and sellers can leverage these opportunities, which might not be immediately visible to the general public.

In my local area at present, there are 55 homes listed for sale on the Multiple Listing Service (MLS). However, when we factor in properties categorized as Expired listings, Temporary Off Market, Withdrawn, Pre-Foreclosure, and For Sale By Owner, we substantially increase the pool of potential listings, nearly tenfold. At Cobbleridge Realty, we've been employing this method in conjunction with cutting-edge algorithms to unveil concealed opportunities that are primed for sale but have not yet been made available to the general public. These homes exhibit a high likelihood of being sold.

So, the inventory shifts from merely 55 homes to an estimated average of around 2000 homes. Is this approach straightforward? Not at all. Are all these homes hidden gems? Certainly not. Will every homeowner be amenable to a sale? Not necessarily. Does this method take longer than the traditional route? Yes, it does. Nonetheless, this expanded search will uncover a home that suits your needs perfectly.

Over the past 2.5 years, I've been discreetly identifying off-market homes for prospective buyers in Suffolk County, and the results have been remarkably successful. In 2024, it's likely that this aspect of my business will comprise a substantial portion, accounting for at least 85%, or around 70 homes.

In summary, the real estate market is not always accurately reflected by what is publicly listed. Off-market homes represent hidden opportunities that can be a game-changer for both buyers and sellers. To make the most of these opportunities, it's crucial to look beyond the surface and tap into the world of unadvertised properties, relying on expert guidance and insider connections. This underscores the significance of "don't believe your lying eyes" in the context of the dynamic real estate market.

In a world where the number 10 can be reached through various routes, and where real estate opportunities extend beyond what's publicly listed, the key takeaway is to embrace diversity and consider the multitude of paths available to us. To navigate these opportunities successfully, it's essential to keep an open mind, leverage expert knowledge, and, as the saying goes, "don't believe your lying eyes" when assessing the world of possibilities in both life and real estate.