Three What If Scenarios Keeping in mind that our local and national economies are improving, inflation is real and mortgage interest rates, are rising, We can evaluate the financial risks by asking ourselves which of these three scenarios is most likely: Home Prices stabilize and mortgage rates rise. Using the example in the picture above, if mortgage rates rise to 6%, waiting may cost our buyer clients the extra expense of $175.86 more per month. If the value of the properties they’re interested in don’t drop more than 13% in value before mortgage rates inflate from current rates to 6%, the decision to wait would create a financial compound fracture. Waiting would mean they've lost on two fronts, Value & Price and Cost & Expense. Home Prices drop more than 13% and mortgage rates rise to 6%. Home Prices drop and mortgage rates stay the same or fall too. If you believe that home values in your market will fall faster and further than mortgage rates will rise (2. or 3. above), then advising your buyer clients to stay put is the way to go. Keep your eye on the market and when you see a favorable entry point, advise them to make their move. If you think prices won’t drop more than 13% before mortgage rates rise to 6%, then your logical left brain will tell you it's wise to advise your buyer clients, “Because home values are less likely to fall more than interest rates will rise, now is a safe time to make move you've been waiting and wanting to make." Do your homework on property-value-trends for your micro markets, consider the implications of rising mortgage rates, Rise Up and advise with confidence. Here’s what I think about my micro-market. . . I think home values are stable and some neighborhoods will enjoy a rise in prices/values. Mortgage rates have risen about 1% in the last four months and will continue to creep up. When my clients who would like to move, ask me if it's a safe time to move, I would discuss Price & Value and Cost & Expense factors with them. Afterwards, we'd be out the door dream home shopping. Pronto. What do you think? What's happening in your market? What are you advising? ~~~~~~~~~~~~

1. It's 2011. Not 2010 or 2009. Viva 2011
What's your real estate market like this week? Is it better than it was a year or two ago?
Back then we had the difficult task of sharing mostly bad news. A rational Fear Of Loss kept buyers
who wanted to move from making a move. It was simple logic, buy too soon and home values might
fall, resulting in a financial loss.
Last year the Federal Homebuyer Tax Credit artificially stimulated 1st Quarter home sales. The free-
money party ended in April of 2010 and real estate sales activity went from gangbusters to bust. It
pretty much stayed crappy until January 2011.
From what I can see across the inter-webs and personal experience, the unstimulated 1st Quarter of
2011 is equal to or better than the artificially stimulated 1st Quarter of 2010. Which means that most
likely, the balance of 2011 will be way better than 2010. Not a month to soon, amen.
But I'm worried. Real worried.
I'm Worried About Shell Shock
It's been so crappy for so long, some us may be suffering from Shell Shock. When someone asks if
now would be a good time to buy, we start mumbling, our shoulders slump and the light in our eyes
dim. We hem and haw. Because we've been so beat up for so long, our answer limps from our mouth
to their ears. On occasion we allow past emotional scaring to over ride current intellect and logic. This
is normal human behavior, but we're not paid to be normal. We're paid to perform.
People are counting on us for unbiased and expert real estate opinion and analysis. When they ask
the question, "Is now a safe time to make a move?" they expect a thoughtful and intellectual answer.
Not an emotional reaction steeped in Shell Shock.
It's Time To Bury The Past and Rise UP

2. The Fear Of Loss is perpetually valid. Yesterday, the likely hood of suffering a financial loss by buying
in falling market was high. Today's and tomorrow's market is 180 degrees different. If our buyer clients
want to make a move and they don't, waiting may cause them financial loss.
It's a new day and a new market. Let's think, advise and act like it.
Let's start by reviewing and sharing a few important factors with our homebuyer clients.
Price & Value and Cost & Expense Factors
Advising our buyer clients to Not-Buy-Now because home values may go down, and they will have lost
money by overpaying, is an example making a decision based on the Value & Price factor. Last year in
many micro-markets this was smart, simple and logical.
Today, if weʼre sincere about helping our clients avoid financial loss, we'll want to include Cost &
Expense factors in our advisory analysis.
Unless our buyer clients are paying cash when they buy, they're going to use mortgage financing.
Their mortgage interest rate determines the Cost & Expense of buying and has a bottom line effect on
whether waiting to buy will result in a financial Win or Loss.
Hereʼs an example of what Iʼm talking about:

3. Hereʼs how we can use both Value & Price and Cost & Expense Factors in our advisory analysis. To
figure out if it's better to wait or make the move, consider alternate future outcomes.
Three What If Scenarios
Keeping in mind that our local and national economies are improving, inflation is real and mortgage
interest rates, are rising, We can evaluate the financial risks by asking ourselves which of these three
scenarios is most likely:
1. Home Prices stabilize and mortgage rates rise. Using the example in the picture above, if
mortgage rates rise to 6%, waiting may cost our buyer clients the extra expense of $175.86 more
per month. If the value of the properties theyʼre interested in donʼt drop more than 13% in value
before mortgage rates inflate from current rates to 6%, the decision to wait would create a
financial compound fracture. Waiting would mean they've lost on two fronts, Value & Price and
Cost & Expense.
2. Home Prices drop more than 13% and mortgage rates rise to 6%.
3. Home Prices drop and mortgage rates stay the same or fall too.
If you believe that home values in your market will fall faster and further than mortgage rates will rise
(2. or 3. above), then advising your buyer clients to stay put is the way to go. Keep your eye on the
market and when you see a favorable entry point, advise them to make their move.
If you think prices wonʼt drop more than 13% before mortgage rates rise to 6%, then your logical left
brain will tell you it's wise to advise your buyer clients,
“Because home values are less likely to fall more than interest rates will rise,
now is a safe time to make move you've been waiting and wanting to make."
Do your homework on property-value-trends for your micro markets, consider the implications of
rising mortgage rates, Rise Up and advise with confidence.
Hereʼs what I think about my micro-market. . .

4. Hereʼs what I think about my micro-market. . .
I think home values are stable and some neighborhoods will enjoy a rise in prices/values. Mortgage
rates have risen about 1% in the last four months and will continue to creep up.
When my clients who would like to move, ask me if it's a safe time to move, I would discuss Price &
Value and Cost & Expense factors with them. Afterwards, we'd be out the door dream home shopping.
Pronto.
What do you think?
What's happening in your market? What are you advising?
~~~~~~~~~~~~
Cheers and thanks for reading.
PS. If can be helpful, let me know - Ken Brand 832-797-1779
©2011 Ken Brand - BrandCandid.com | Prudential Gary Greene, Realtors - 9000 Forest Crossing, The Woodlands,
TX 77381
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