Help Your Buyers Understand WHY There is NO Crash Coming!

Happy Thursday and almost done with August!
I keep hearing this more and more:
"I'm going to wait. I think the housing market is going to crash, and I'll buy when I can get a deal."
Are you hearing the same thing? 

I understand why buyers feel that way. They see homes sitting on the market longer, they see price reductions, they hear about layoffs, credit card debt, inflation, affordability problems, and economic uncertainty. In some neighborhoods, we are starting to see homes sell for a little less than the previous comparable sale. So, I don’t think we should dismiss their concern, but we do need to help them understand the difference between a softer housing market and a housing crash as those are two very different things. 

What Would It Take to Have Another 2008?
A true housing crash generally requires one very important ingredient:
A large number of homeowners who are forced to sell.
That is what made 2006 through 2011 so different.
People were highly leveraged, and many had little or no equity. There were risky loan products everywhere. When homeowners couldn’t make their payments, many couldn’t simply sell the house and walk away with equity. That created foreclosures, short sales, and forced inventory.
Today, the financial position of the American homeowner is completely different. 39.4% of owner-occupied homes in America are owned free and clear with no mortgage at all!
Now look at the homeowners who do have mortgages. 66.7% of outstanding mortgages have a rate below 5%, and 49.9% have a rate below 4%.
Now let’s do the crazy math. When you combine the free-and-clear homeowners with the homeowners carrying low-rate mortgages, roughly:
80% of homeowners either own their house free and clear or have a mortgage below 5% and approximately 70% either own their house free and clear or have a mortgage below 4%.
Think about what that means. The overwhelming majority of homeowners are sitting in a very strong position. Many have enormous equity. Many have incredibly low monthly payments. And millions don’t have a mortgage payment at all. 

So Where Does the Forced Selling Come From?
This is the question I would ask a buyer who tells me they are waiting for the crash. "What do you think is going to force millions of homeowners to sell their homes at distressed prices?" Because that is the missing piece. A homeowner who owes $450,000 at 3% on a house worth $900,000 may not like today’s economy. They may be worried about their job. They may decide not to move. But they are not automatically a distressed seller. In fact, that 3% mortgage may actually make them less likely to sell. That is one reason inventory has remained constrained. 

What About Foreclosures?
Here’s another major difference. Today, about 4.37% of mortgages are delinquent, and approximately 0.67% are in the foreclosure process and those numbers increasing in some areas, but that is nowhere near the broad distress we experienced during the financial crisis, and today’s homeowners generally have considerably more equity available to solve problems before foreclosure ever becomes necessary. 

Could Prices Still Go Down?
Absolutely. This is where I think we need to be very careful with buyers and not tell them, “Home prices can’t go down.”
Some areas could decline 5% or more. Certain neighborhoods or property types could struggle. Sellers may become more negotiable and there will be opportunities. But a price correction is not automatically a housing crash, and that distinction matters. 

Here’s the Conversation I Would Have With the Buyer
When someone tells you, “I’m waiting for prices to crash.”
Don’t argue with them. Ask them, “What kind of decline are you expecting?”
Let’s say they answer, “I think prices could drop 10%.”
Great. Now we have something we can actually analyze.
Suppose the house they like today is $800,000. A 10% correction takes it to $720,000. That sounds fantastic.
They saved $80,000, but now let’s look at everything else. What happens if interest rates don’t fall? What happens if rates rise? What happens if the seller would accept $775,000 today? What happens if we can negotiate a seller credit toward closing costs or an interest-rate buydown?
What happens if the buyer waits two years for that $80,000 decline and spends $80,000 or $100,000 in rent while waiting? 

And here is the really important question:
What Happens If Rates Fall and Everybody Comes Back?
This is the part buyers frequently overlook. 

Many buyers are sitting on the sidelines for the same reasons. They are waiting for Lower rates, Lower prices, and More certainty!
But what happens when rates finally fall enough to make everyone comfortable? Those buyers don’t come back one at a time, a lot of them may come back together.
Then suddenly, there are more offers, less seller negotiation, fewer seller credits, more competition, and potentially higher prices.
The buyer waiting for the perfect interest rate may ultimately get a lower rate but pay substantially more for the property. 

What Realtors Need to Explain
Our job today is not to convince everyone they should buy a house. Some people absolutely should wait. Our job is to help them make an informed decision instead of making one based on fear.
When a buyer tells you:
“I’m waiting for the crash.”
The answer isn’t:
“There isn’t going to be one.”
The better answer is:
“Let’s talk about what would actually have to happen for that kind of crash to occur, and then let’s compare the cost of waiting with the opportunity you have today.”
Show them the homeowner equity.
Show them the low-rate mortgages.
Show them the free-and-clear homes.
Show them today’s delinquency and foreclosure numbers.
Then run the numbers on their specific situation. 

And Finally… Find the Real Objection
Sometimes, “I’m waiting for the market to crash” isn’t actually the real objection.
The real objection might be:
“I’m scared of this payment.”
“I’m worried about my job.”
“I have too much credit card debt.”
“I don’t have enough money saved.”
“I’m afraid I’ll regret buying.”
“My parents are telling me to wait.”
“I remember what happened in 2008.”
“I don’t understand how I can afford this.”
That is where Realtors and lenders need to work together.
Don’t just accept, “They aren’t ready.” Find out why they aren’t ready and bring me into the conversation before they even find the house.
Let’s figure out whether the problem is the payment, the down payment, consumer debt, credit, income, a home they need to sell, fear of declining values, or simply not understanding the numbers.
Because once we know the real objection, we can determine whether there is a solution.
This market isn’t about selling harder.
It’s about educating better.
And the Realtors and Loan Officers who learn how to have these conversations are going to win a lot more buyers who otherwise would have spent the next year sitting on the sidelines waiting for a crash that may never come.
AND NOW… FANTASY FOOTBALL!
I have a big ass Trophy in my office that we will be engraving the winners’ names on each year!
We have one league full, and if we move a few things around, we will have two more solid leagues. So jump in, join us, and we will all have a blast!  

ROOKIE DIVISION
Perfect if you're new to Fantasy Football or just want to have some fun.

Tuesday, September 1 - Draft at 5:00 PM – FULL!
Join Rookie League #1

Wednesday, September 2 - Draft at 5:00 PM
Join Rookie League #2

VETERAN DIVISION
For those of you who already know your way around Fantasy Football and have played for a few seasons.
Think you know what you're doing?
Come prove it.

Tuesday, September 1 - Draft at 6:00 PM
Join Veteran League #1

Wednesday, September 2 - Draft at 6:00 PM
Join Veteran League #2

Let's fill these things up!
If we don’t get enough players, we’ll consolidate a couple of the leagues, but I’d much rather see a bunch of you jump in and have some fun with us.

Interest Rates
We had a really good Tuesday! A not-so-good yesterday, and today is a little weaker!  

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s –
• Conventional (≤ $832,750): low 6s
• High-balance: mid to high 6s
• Jumbo: Mid 6s
• Bridge Loans  7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Buydowns Available (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Commercial Loans
• Fix and Flip Loans  

Rates subject to change without notice.

Condo Update
Good news:
Nothing this week!     

Bad news:
No news this week!  

We love your Non-Warrantable Condo loans!!
Need help checking a condo? Call me, and we can look it up in real time.
Also:
Full California “naughty list” available here:
https://mikemeena.com/non-warrantable-condos/

Let's Connect

If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,