Holiday Edition: Navigating Shutdowns, Builder Deals, and the Myth of Downsizing
Welcome back to the Welcome Home Radio Podcast! As we approach Thanksgiving, our team wishes you and your family a safe and joyful holiday. Remember those who might be lonely this season—a veteran, someone challenged, or someone simply alone—and consider inviting them to your table.
This week on Episode 283 of “Your Turn to Ask,” we dove into critical questions about government delays, builder incentives, and the best way for realtors to pivot in a shifting market.
Does the Government Shutdown Slow Down Your Federal Loan?
A common question we’ve received is whether a government shutdown delays federal loan programs like VA, FHA, and USDA.
The short answer is: Not as much as you might think for the end user.
As mortgage lenders, we handle the bulk of the underwriting, which mitigates the direct impact. However, there can be “friction” points:
- Tax Transcripts: Obtaining required tax transcripts can slow down if the IRS is affected. Savvy buyers can often get these quicker by requesting them directly.
- FEMA/Flood Insurance: While we haven’t personally seen it on recent loans, some listeners are reporting challenges in obtaining FEMA flood insurance, which can necessitate more expensive private providers.
- Commercial Loans: Commercial transactions are definitely seeing delays, pushing expected closing dates back significantly.
The takeaway: While our secondary market team sees struggles, we are actively working around these federal bottlenecks to ensure minimal disruption to buyers at the closing table. Plan ahead and be patient.
Are Builder Incentives Killing Resale Dynamics?
The second hot topic: Are builders’ incentives (rate buydowns, closing credits) changing the dynamic for resale homes?
- Direct Impact: If you are selling a resale home in a neighborhood where builders are actively offering deals, you are absolutely affected. A builder can offer a buyer a 4.9% rate or cover thousands in closing costs, making their new construction home financially more attractive than your existing home.
- Let’s Make a Deal: Builders are playing “Let’s Make a Deal.” They want to maintain their market control and churn their inventory. Buyers can leverage this position to negotiate aggressively on rates and credits.
- Resale is “Is the Price Right?”: In contrast, traditional sellers are often still playing “Is the Price Right?” hoping to get top dollar without offering incentives. This difference in flexibility is what makes builders big winners in the current environment.
The market cycle has truly shifted. We’re currently in a buyer’s market—a situation we haven’t genuinely seen since before the low-rate, high-competition frenzy of the past few years.
Should Realtors Pivot Marketing? (Hint: The Move-Down Market is Key)
The final question posed: Should realtors pivot marketing toward move-up or cash buyers rather than exposed to “financing friction”?
The consensus? Realtors should certainly pivot, but perhaps not just to the “move-up” buyer.
The Power of the “Move-Down” Market:
- Baby Boomers are the Largest Market: The largest consistent market is the Baby Boomer generation looking to “move down” or downsize. Their kids are grown, and they no longer need the space.
- The Downsizing Paradox: As one panelist noted, a baby boomer living in a paid-off home (especially one with tax exemptions, like a 100% disabled veteran) has little incentive to move. Downsizing often means selling high but buying a smaller home at a price that isn’t significantly lower.
- The HOA Kill-Switch: Skyrocketing HOA fees, sometimes reaching $600 a month for seemingly modest amenities, often eliminate the financial appeal of downsizing for these cash-rich buyers.
New Business Model for Realtors:
Instead of focusing solely on traditional listings, realtors can pivot their business model to target flexible markets:
- Focus on Cash Buyers: Targeting cash buyers (often the downsizing demographic) helps realtors avoid the “financing friction.”
- Rural and Custom Solutions: Focus on construction solutions for veterans and FHA buyers who want to build their own custom home on larger lots, avoiding HOA fees and the competitive resale market.
- The Double Commission: Realtors who connect land sellers with custom builders, and then bring in the buyers, are successfully earning commissions on both sides of the transaction—a successful strategy in a cooling market.
Final Market Summary
To wrap up our three key discussion points, here is a quick snapshot of the current market reality:
- Home Values: They are holding (not growing, but not collapsing).
- Buyers: They are tired, but they are not gone.
- Sellers: They are stubborn, but they are teachable.
- Federal Loans: They are a little slower, so plan ahead.
- Builders: They are winning on incentives.
Keeping everyone calm and guiding them to the best solutions is the hardest—and most valuable—job for real estate professionals right now.
Do you have a question about the market, lending, or building? Please keep your questions coming! You can find us at welcomehomeradio.net, and be sure to like, share, and follow us on social media!
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