Rubber Band King

People detest my wallet.  At Brooklyn Bagels next door to our office, I get stares and sneers from people in line whenever I take it out.  At dinner with friends about anyone has some type of abhorrent reaction.  I’ve probably received a dozen gifts of beautiful leather wallets with my initials engraved from people desperately trying to convert me.  Not a chance. I’m not a contrarian or purposely trying to get a rise out of people. This wallet has deep family roots. My Grandpa Gerry and Dad used the same wallet and taught me, the next generation. I’m just carrying down the family tradition. My current wallet is an orange rubber band. I say current because when it breaks, I usually switch colors. Red. Blue. Pink. Rubber band original color. Rubber bands are cheap, effective, and very difficult for wives to break into. Another benefit is that it’s a crime deterrent. I’ll explain.

Many jobs have been impacted by the technological revolution. Some like the toll booth operator have just vanished and others like the pin boy at the bowling alley we shed tears for wondering why they can’t replace the smelly shoe giver and taker with Lysol in hand instead.

One of the professions hit the hardest has been the local street mugger. Despite “supporting local”, street mugger is not a job most locals weep about.

The crime deterrent part of my wallet comes into the strategy of the inner workings beneath the band. Keep the smaller bills on the outside so the one dollar George Washington buck is the bait. With a cheap rubber band and small donation dough, it screams, who would want these crumbs???  I’m not sure if anyone even wants the cash anymore. We stayed over in Miami last Friday night to watch my Chicago Bulls get blown out by the Heat. They don’t take cash at the game and even the bellhops at the hotel can now be tipped electronically. Hence the poor local street mugger. But, Cash Buyers are still the Kings in Real Estate…for now. That window of an advantage is going to go away fairly soon and here is why….

Right now cash buyers don’t have lots of competition. Once the mortgage rates jumped from 3% to 7-8%, it took out so many buyers who are now sitting on the sidelines. Some are hanging on to their “Lord of the Rings Precious” interest rate. Others are in rentals or living with parents. Conversely, each year that goes by the percentage of homeowners at low interest rates drops. Some sell or the loan gets paid off. 72% were 4% or below in 2023. The number is estimated to be at 59% by the end of this year.  Even with all that, prices are stubbornly not going down. They even hit a new high in March. I talked about some of the reasons why in a  Palm Beach Post story last week.  Locally, there is a lack of land in the prime areas east of the turnpike and I/95. The growth of people are still moving to Florida. You can check out the latest market sales, inventory, mortgage rates, and population statistics on our Real Estate Statistics homepage.

Two thoughts with that as we head to the summer months.

1. Inventory is rising. The base we started at was so low from the pandemic and the lack of land giving way to new construction means that it hasn’t had an effect on bringing prices down. But once we get into the hot summer months, some homes and condos will see downward pressure. The inventory category jump though will be more problem child homes. Think poor floor plans, road noise, dated, lack of views/pretty landscaping. That is where the inventory is making its biggest jump. Condos have also had more inventory but much of that is more to do to the new condo reserves and inspections being put into place. (Watch for condos to rebound in 2025 once that is finished by the end of this year).

2. Cash will only be King for a short while longer. This brings me back to my wallet story. Buyer pent up demand has been growing for 2 years. As I wrote earlier, there will be less 3% interest rate owners over time. Then the big one, which is interest rates, will get below 6%. The FED has been pushing for this and inflation has been stubbornly hovering in the 3% neighborhood. Eventually, you will see rate cuts. Maybe this summer. Perhaps this fall. Probably by 2025. When that happens, CASH buyers who now have no competition from mortgage buyers will be downgraded from King to a Prince or Princess. Even, in the most ritzy areas where there are only cash buyers, there will be more Buyer competition. How can that be you say? This is a hard concept to grasp but trickle up economics come into play. A $300,000 townhouse sells and the Buyer uses a mortgage to aid in the purchase. The townhouse Seller than eyes a $600,000 home. The $600,000 home in which that Buyer goes after also needs a mortgage. That sale lets loose the $600,000 Seller who is now a $1,200,000 Buyer but still utilizes a mortgage. The $1,200,000 Seller of that home is now a cash buyer to go after the $3,000,000 home. However, they aren’t bidding against the other cash buyer unless all the dominoes of the the mortgage buyers free them up to have the cash from the Seller. Right now they don’t. Further, most loans today can be approved in 10 days. The advantage of the CASH buyer becomes dissipated from there being a lot more Buyers, and from losing the advantage of time certainty. Most want a ten-day inspection whether it’s a cash buyer or mortgage buyer. The mortgage buyer with a ten-day inspection time period will now solve the mortgage contingency in the same time period. All of a sudden the Queen realizes there is no cake and is eating a bagel or bialy with the rest of the common folk. Brooklyn Bagels BTW has great bagels and bialys!

What all of this means is that if you are a cash buyer, look hard at purchasing in the next six months or at the very beginning of next year (making a big assumption that rates haven’t yet dropped) before you have competition. Competition means you will be paying more. If you can swing the mortgage now and are in a stable job, then consider to push yourself as well.  Prices will be driven up by more fellow buyer competition. Remember, you can always renegotiate the mortgage rate through refinancing supposing there is a drop in rates. But you can’t renegotiate the price. Markets go up. They go down. They also stretch in and out over time like the rubber band.

One of the 57 promises in our Home ECHOnomics Guarantee is negotiation. Today since you are a loyal reader, perusing this, I’ll share with you a free propriety negation tip. Make sure to use my rubber band wallet method when walking through the house.  First, be certain the listing agent sees it. One look at that wallet by the listing agent and you will win the negotiation. They know you have no money left to give!

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Jeff Lichtenstein, originally from Chicago, got his start in the home furnishings textile business where he traveled over 35 weeks a year selling fabrics. After the family business was sold, Jeff moved to Florida and became a real estate agent. Today he is the owner and broker of Echo Fine Properties, a luxury residential brokerage voted best brokerage of the year. Jeff manages a non-traditional model of real estate that mimics a traditional business model. Echo has 80 agents, an average of one million dollars per transaction and over 500 million in annual sales. Between traveling for work and annual family trips to national parks with his wife and 2 now adult children, Jeff has visited 49 states. He is also one of the few Chicago White Sox fans you’ll ever meet.  Some publications he has been quoted in.

Author of business & leadership book How Making a Sandwich Can Change Your World –  The Amazing Success of the PB&J Strategy – Available to Buy Now!

Feel free to ask him a question directly at [email protected] including a complementary  valuation of your home.

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About the author

Jeff Lichtenstein, originally from Chicago, got his start in the home furnishings textile business where he traveled over 35 weeks a year selling fabrics. After the family business was sold, Jeff moved to Florida and became a real estate agent. Today he is the owner and broker of Echo Fine Properties, a luxury residential brokerage voted best brokerage of the year. Jeff manages a non-traditional model of real estate that mimics a traditional business model. Echo has 100 agents, an average of one million dollars per transaction and over 500 million in annual sales. Between traveling for work and annual family trips to national parks with his wife and 2 now adult children, Jeff has visited 49 states. He is also one of the few Chicago White Sox fans you’ll ever meet. Some publications he has been quoted in.

Author of business & leadership book How Making a Sandwich Can Change Your World – The Amazing Success of the PB&J Strategy – Available to Buy Now!

Feel free to ask him a question directly at [email protected] including a complementary valuation of your home.

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