DETROIT (WXYZ) — The cost of everything is going up. The good news is home prices have come down, but it’s not the steep drop off that many had hoped for. 2023 is shaping up to be a toss up between buyers and sellers and we are just about to hit the high season.
“It’s totally our style, it’s in the neighborhood we love. There’s definitely some conversations to be had,” said homebuyers Rikki and Gian Carlo Puzzuoli.
Rikki and Gian Carlo Puzzuoli have been looking for their perfect home for a long time now.
“With looking at these home prices dropping, the homes are far more attractive, the competition is less, the rate isn’t too scary. I mean historically speaking, they’re not awful,” said Puzzuoli.
They said last summer and earlier were not ideal.
“If it was a situation before where we came into an opportunity, and maybe it was pretty close to perfect, maybe we hemmed and hawed, by the time we made our minds up, the house was gone,” said Puzzuoli.
They told 7 Action News they’ve had a number of conversations, even contemplating alternate mortgage products like adjustable rate mortgages.
“I definitely can see the value. And in my own personal opinion, it’s just understanding the products completely. And knowing when that rate is going to adjust and is that something you can still afford. Just knowing and educating yourself before entering into a loan agreement like that,” said Puzzuoli.
I reached out to Rodger Dabish, a realtor with Re/Max Nexus to get an idea of what the market looks like from his perspective.
“There’s a joke that we say, you know you have the right price when no one is happy with the deal," said Dabish.
He says that’s because it’s far more balanced between buyers and sellers.
“We’re in a neutral market. We have to look at what fair market value is and both buyers and sellers have to have an expectation that we’re going to see fair market value. Sellers can’t expect to get premiums anymore, and buyers aren’t going to steal houses like we did 15 years ago,” Dabish said.
I asked him what he expects to see more of in 2023.
“We’re going to see more arms probably come to the market now because interest rates are going to be lower for an arm. We’re also seeing seller concessions. We’re seeing sellers that are paying for some of the closing costs. We haven’t seen that in several years. So there are different options to help lower the cash to close," Dabish revealed.
So a lot of people think waiting is kind of a good idea because they have this optimistic view about what’s down the road.
7 Action News asked Dabish, "Could it be worse?"
“It could be. The problem is is that once interest rates drop again, that demand is going to rise and we’re going to see prices go up. So if you already own the house at a lower price today, your option is to refinance. If you wait and purchase a house six months from now and prices have gone back up because interest rates have dropped, now you’re not saving yourself any money," Dabish said.
Aaron Kozikowski is a loan officer with Ross Mortgage Corporation. He expects interest rates to come down as inflation eases.
He says this is why alternative mortgage products are expected to be more attractive this year.
“Anytime we see rates rising where we expect it to come back down, things like adjustable rate mortgages are more common just because folks understand that they’re not going to be in that loan for very long. They’re going to want to refinance,” Kozikowski said.
He understands the 2008 crash made a number of people hesitant about adjustable rates, but says you really need to understand your own personal financial situation and a good loan officer can help with that.
“In terms of an adjustable rate product, what you really want to consider is that fixed period if you have one. So if you know that you’re only going to be in the home five years, maybe a 5/1 arm is going to be the best option for you,” said Kozikowski.
A 5/1 ARM is a loan with a fixed interest rate for the first five years and that then converts to a variable rate which adjusts every year. These typically come with much lower interest rates than a traditional mortgage.
He also says sellers may want to consider sweetening the pot for potential buyers.
“Another thing to consider are certain programs like the 2-1 buydown. That can benefit a seller who might have a house that’s been sitting on the market that they’re struggling to sell. That’s a way to bring in new business,” said Kozikowski.
In a 2-1 buydown, the seller buys down the interest rate two whole points the first year and one point the second - saving the buyer money up front.
Rikki and Gian Carlo Puzzuoli can understand why many people are still waiting but say it’s all about perspective.
“Yeah, rates are going to drop, but if your dream house is out there, right now, don’t let that stop you. Go get it. Go get it,” said Puzzuoli.