MMasters in Business
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15 November 2023

At the Money: The Best Way to Buy a House Right Now

2Frameworks
5Insights

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Frameworks in this episode

Strategy5 steps

The Closeable Offer Method

Win sellers by making the offer credible, simple, and likely to close

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Finance5 steps

The Long-Term Housing Lens

Judge a home by years of use, not short-term price fluctuations

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Explainer· 3

Explainer01:22

Why Higher Mortgage Rates Have Not Ended Bidding Wars

Higher rates have weakened affordability, but they have not produced abundant choices for buyers. Miller identifies the chronic shortage of homes for sale as the key force sustaining competition and prices.

  • Inventory remains absent from many markets
  • Bidding wars rose even as mortgage rates increased
  • Supply is the primary metric for understanding competition
  • Affordability pressure does not automatically reduce prices

“because inventory is absent from the equation, buyers don't have a lot of choices.”

Jonathan Miller · 01:27

“the number one thing to look at really as a metric is this supply inventory and inventory.”

Jonathan Miller · 01:46
#inventory#mortgage rates#bidding wars#housing
Explainer04:47

How Cheap Existing Mortgages Lock Homes Off the Market

Many homeowners hold mortgages far below prevailing rates, making a move financially unattractive. Incremental rate declines may release some inventory, but Miller does not expect a quick return to the exceptionally low rates that created the lock-in.

  • Existing low-rate mortgages discourage owners from selling
  • Small rate declines can gradually release inventory
  • Rates around three or four percent are unlikely to return soon
  • A recession could drive sharper cuts but would also reduce demand through job losses

“each time the rates sort of incrementally drop, homeowners become sellers and that adds a little bit of inventory, but not enough, but it every…”

Jonathan Miller · 06:18

“The problem is then you get job loss, right, and we have job loss, that's less people that will buy homes.”

Jonathan Miller · 06:46
#mortgage lock-in#inventory#interest rates#recession
Explainer07:19

Why Higher-Priced Cash Buyers Feel Less Rate Pressure

Cash purchases become more common as home prices rise, while buyers lower down the price ladder depend more heavily on financing. That divide causes mortgage-rate increases to suppress financed sales more sharply than cash transactions.

  • The probability of a cash purchase rises with price
  • Very high-end transactions are predominantly cash
  • Buyers in the two-to-five-million-dollar range often still need financing
  • Financed Manhattan sales fell much faster than cash sales in Miller's example

“the higher you go in price, the higher the probability the purchase is a cash transaction.”

Jonathan Miller · 07:35

“The lower you go in price, the more dependent you are on a mortgage.”

Jonathan Miller · 08:10
#cash buyers#financing#luxury real estate#mortgages

Tool· 1

Tool12:21

How Large Builders Use Mortgage Rate Buydowns to Unlock Demand

With existing-home inventory scarce, new construction represents a larger share of available choices in some markets. Large builders can subsidize buyers' mortgage rates, reducing monthly costs and resistance to purchasing, although smaller builders may lack the financial scale to offer the same incentive.

  • New construction gains relative importance when existing inventory is low
  • A builder can subsidize a below-market mortgage rate
  • Rate buydowns reduce monthly financing resistance
  • The incentive generally requires substantial financial scale

“one of the things that large national builders have been doing is buying down and interest rates, which has been very well received.”

Jonathan Miller · 12:52

“But when you do that, you're reducing the resistance to the purchase.”

Jonathan Miller · 13:24
#new construction#rate buydown#builders#mortgages

Takeaway· 1

Takeaway09:30

The Overlooked Value of an Agent as a Negotiation Buffer

Miller argues that agents do more than find properties or process paperwork. By insulating buyers and sellers from direct confrontation, they can reduce intimidation and help clients negotiate more effectively.

  • Direct opposition can intimidate some negotiators
  • An agent creates emotional and conversational distance
  • The buffer can protect negotiation quality
  • The benefit depends on the buyer and the agent's skill

“they provide a buffer between the parties.”

Jonathan Miller · 09:36

“that's the service that is provided to have a third party to insulate you from direct negotiation.”

Jonathan Miller · 10:00
#real estate agents#negotiation#communication