What makes Austin real estate buyers happy? The answer may surprise you. What apparently doesn’t make a buyer happy is a rock bottom price at a 4.37% interest rate. If that was the case, there’d be far less buyer angst and hand wringing than there is now in the Austin real estate market. We’d have far fewer buyers in Austin flaking out on home purchase transactions for no good reason.
No, buyers are happiest in a seller’s market, winning a multiple offer bid-up against 5 competing buyers, and paying 10% over market value at 6.25% interest, and happily covering the appraisal shortage with additional cash at closing. This is not a joke, I’m dead serious. The latter 6.25% buyer feels victorious and ebullient about the purchase. The former 4.37% buyer feels like, perhaps, a mistake was made.
Austin buyers were much happier in 2007, at the peak of the market, when they had a lot less to pick from and had to work a lot harder to find a home. Buyer remorse, buyer finickiness, buyer flakiness, and just plain old cold feet existed to a far lesser degree in the harsher buying environment of 2007 than in the buyer’s dream market of today. Don’t believe me? Go ask any production Realtor in Austin. By “production”, I mean, go talk to Realtors who are busy and closing deals every month, like me and Sylvia. Ask listing agents if it’s a lot harder to get deals across the finish line today than 3 years ago, notwithstanding loan impediments, just purely from a buyer emotion standpoint. They’ll tell you it is and they’ll have stories of buyers backing out for frivilous reasons, or, in some cases, no stated reason at all.
This doesn’t make sense, I know. So what’s going on here? Why all the buyer angst?
The problem is too much choice. Imagine you want to buy a widget and there are only two models and two colors – black and white, standard or deluxe. You pick a standard black version, go home and feel pretty happy about your pick. You are satisfied you made a good choice and have no remorse or misgivings.
Now imaging there are more choices, like 10 basic models and a ton of confusing options (sort of like a car) and a rainbow of color combinations. You think long and hard and finally make a choice. At home with your Orange “Standard Plus XP2″ model, with the black accent stripe, you were feeling pretty good but suddenly you start wondering if maybe you shouldn’t have gone with the Purple Standard-1 XPa.0 model, which had everything you really needed and was cheaper. Soon you start thinking of returning your widget. Yes, you definitely think you made a mistake and will be returning the widget tomorrow.
The beauty of a Seller’s market, and the reason buyers are happier in a seller’s market, is they are spared the curses of ample time and ample choice. You want a 2200 sqft 1-store in SW Austin for under $235K that feeds into the best schools?… and there are 3 Active listings and 10 Pendings, and the agent for 1 of the Actives, which just came on the market today, calls back to say he already has multiple offers and will be presenting to the owner tomorrow at noon..so you better hurry.
Guess what? The buyer who gets that (hypothetical) house in multiple offers for over list price is more pleased with that purchase than the lemon-faced buyer of today who’s sulking at closing because she locked in a 4.5% interest rate and could have done better by waiting.
It’s enough to make an agent want to quit working with buyer’s in a buyer’s market, and I personally have. I’m taking the rest of the year off from buyers, except for referrals and repeat customers. A lot of todays buyers need a therapist, not a Realtor. The deals are just too good, too numerous and the interest rates too low for them to find true happiness in a market like this. It’s really quite astounding if you think about it.
And now I have to confess that I too am guilty of this. We paid 4.75% interest on our new loan for the house we bought last month. And now I feel like a real Dummy. How could I have been so stupid? 4.75% interest is high. I’m not kidding. I actually sprawled out on the couch one day, stared at the ceiling, back of my hand on my forehead, and felt regretful. I wondered if it might make sense to refinance already, maybe to a 15 year loan for 3.75%. Am I crazy? No, I’m normal. I understand these emotions. But I didn’t flake out on my deal because of it.
We’re all human. A byproduct of being human seems to be the counter-intuitive condition of decreasing gratitude relative to the goodness life gives us. The better off we are, the worse we feel sometimes. And sometimes we can’t help it. I use to joke with a melancholic friend of mine that if a $20 bill blew down the street and landed on his shoe, he’d pick it up and complain that it wasn’t a $100. That’s how buyers are in Austin today.
How to cure this “good buyer market” blues?
Interest rates and prices need to start rising, and continue rising, slowly, for 5 years. The train needs to leave the 4% station, start chuggin’ through the 5s, and keep on going. The economy needs to improve so that uncertainty about home values can dissipate. Then buyers can pile onto said train, congregate on the rear platform of the caboose, and scream “later losers” to the bystanders who are missing the train because they’re still afraid to get on. And then, those buyers who made a decision and followed through will feel good about themselves, knowing that they bought in a rising market and that others are missing out on the “good move” they made.
To be fair, I’m being somewhat tongue-in-cheek, but just barely. There are some very pleased buyers out there who are happy with what they’ve found, and the interest rates on their new loans. Of this I am certain as we’ve helped many such buyers this year. I’m not talking about you guys.
But as I see it right now, (look out, shameless unoriginal Realtor cliché coming…), there has never been a better time to buy real estate in Austin TX. Sorry, that’s just the best way to say it. This truth won’t be fully acknowledged until it becomes a historical fact. Meanwhile, let the hand wringing and dithering continue, and let those of us who bought at 4.75% interest keep mourning over how high that seems and how we could have done better if only we had just waited longer.From these we can be sure that Buyer Happiness was Higher in Austin Seller’s Market.