sdrealtor is correct that the closing costs request is generally requested by people that cannot afford to pay them. Nevermind that these people have no business buying a home. So a price reduction does not help them at all, thus they request the credit. The credit is used to pay the closing costs. The buyer then obtains the 80/20 and lives month to month hoping to make the mortgage…. Sad but all to true…
A posting above implied that maybe Realtors discourage discounting the price (as opposed to giving a credit) in order to keep the comps up. In general I disagree with that statement. I always simply recommend to my sellers to discount the price for the reasons listed above, (cap gains, etc)… HOWEVER…I can say I have ran across agents (when I represent the buyers side and they are on the listing side) that REALLY puzzled me. Last week we submitted an offer on a very nice place in Point Loma. As I said I regularly credit back up to a full point of my commission to my buyer. Many times my buyer will ask me to simply ask the seller to reduce the price by that amount and pay me the advertised commission less my credit back. So I generally approach the listing agent and run that by them and they tell the seller, which is what I did in this case. Well this listing agent will tell me that “we don’t like to operate like that” and that I should just credit my client directly.” He is a well known agent in La Jolla. He didn’t even run it by his seller, he just acted on his own.
So yes I have seen some amazing things… that once again saddens me….
Back to the main subject, credit doesn’t have to be for closing costs. Some people want to remodel, there are always some request for repairs… etc… Again the sold prices NEVER take this into account.
To me the question is not whether the recession will happen but how deep will it go…. Historical data shows when the yield curves invert… well get ready for the fun.
What REALLY concerns me is stagflation.
I am only a realtor, (and an engineer) so my knowledge of economics and business cycles is rudimentary. I know the typical way to combat inflation is to tighten up the liquidity of cash in the economy, aka raise rates. This reduces demand which in terms bring prices down. I know this is a VERY inaccurate and oversimplified explanation but I am small brained…However when median incomes do not keep up with inflation, and you have runaway energy prices which leak into other standard measures that make up the CPI, (thus driving the true rate of inflation up), combined with a housing market that starts depreciating you can get into a real bad pickle.
What is the expected response of the FED in that scenario?
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