Everyone that has ever been involved in education is familiar with The Bell Curve. The Bell Curve generally applies to how quickly a student population will learn. It recognizes that all students learn at a different rate. Roughly translated, you could say when a new concept is introduced:
- 25% of the students will catch on very quickly
- 50% of the students will take a reasonable amount of time to embrace the new concept
- The last 25% will take a very long time to understand, or may give up before they ever grasp the concept.
Because The Bell Curve involves human nature, it applies to all learning environments. It offers an excellent explanation of what is happening with Buyers in the Real Estate Market. The Housing and General Real Estate Markets both appear to be in full recovery, so why wait if you’re going to end up paying more? Yet, if you think about it:
- 25% of Buyers have made the decision to move forward and purchase Real Estate before prices increase
- 50% of Buyers are warming up to the idea they should make a decision to purchase
- The final 25% will completely miss the boat and end up paying too much, with little inventory to choose from.
With 25% of the buyers already in the market, what will it take to get the next 50% (or normal learners) to buy? It’s likely this next group will purchase in waves during the remainder of this year based on a Triple Threat that will impact their decision. The final 25%, or the buyers that wait too long, will find less desirable prices and a limited selection of homes to choose from as the market continues to recover. What are the next three events that are likely to make life more difficult for buyers?
- Pending Transactions – There are substantially more pending transactions now, compared to any other recent period. As these properties close, they will have a significant impact on sales increases year-over-year. The media will report the upswing and many more buyers will be motivated to make a decision to buy now limiting the opportunities for “slower learning buyers”.
- Beginning of the Northern Selling Season – We are just now entering the active season for sales in Northern States. As the weather improves and sellers that have been waiting for the market to improve finally list and sell their homes, the number of buyers entering the retirement and warm climate markets like Florida will increase. This will also increase competition for slower learning buyers.
- Interest Rates – Many Buyers have felt little or no urgency in making a decision because mortgage interest rates have remained low for so long now. But, there is already talk of The Fed backing off artificially low rates. It will only take an increase of 1 percent before hesitant buyers realize they’ve waited too long and decide to move forward with a purchase. This will also increase competition for existing buyers, once again leading to less of a selection and higher prices.
When you look at the impact of all of the “Triple Threats” outlined above, it’s easy to see why there may never be a better time to buy than today.