Some things baffle me!

During covid and immediately following, my rent-2-own business was booming. The best year I’ve had in this program was the covid year.

After the covid recovery, applications to our program declined dramatically. They’ve been weak for the last 18 months, or so.

This month, they’ve suddenly picked up.

OK, I’m not baffled by what you might think I am. The reason for these trends is clearly the interest rates. When they were so low, interest in our program was strong. When the began to rise, it weakened, in some months almost stalled. Now, with just a quarter-point drop, interest in exploring rent 2 own options has immediately picked up.

What I’m baffled by is, why? This is the exact opposite of what it should be, as I explained in this post almost a year ago. (Jodi, please link to my post: “When is the best time to get into a rent 2 own program, from July, 2023). An inverse correlation with interest rate movements should not characterize curiosity about the rent 2 own option.

If you were actually buying a property now, it might make sense to grab it when rates are starting to fall and before associated savings are offset by house price increases that usually accompany that drop.

But absolutely not so if you’re getting into rent 2 own program. It should be the opposite. Because, in rent 2 own, you are not buying a property now. You only care what the interest rates will be at the end of your 2- or 3-year rent-2-own program when you will be needing to get a mortgage. For the past 18 months that they’ve been at their peak, we’ve known that they would almost certainly be lower at the end of the rent-2-own term.

Furthermore, housing prices are normally higher when the rates are low and lower when they are high, as we witnessed during and after covid.

So, if you have no need to be concerned with today’s interest rate, then the best time to get good value for the purchase of the property is when they are high.

Of course, it may be more expensive for the investor (and hence I may make a little less on a deal) when the interest rates are high, but if you can get a property during that period at good value because the prices are lower, then you will have secured a better buyout price a few years down the road when falling interest rates have likely increased the value of the property. You get both a better deal on a property and a better interest rate than the current one.

The opposite scenario, which seems to be reflected in the applications to our program, means buying when prices are rising, with a less benefit from rates that will likely be lower when you need to qualify.

But, to be totally honest, It’s not really all that baffling. I think I’ve figured it out.

It’s because of human nature.

We, overwhelmingly, tend to react to the immediate, not the long-term or the big picture. We don’t do the full long-term analysis. We salivate at getting into real estate the moment we see a slight (perceived) favourable turn of events.

As Jonathan Haidt has so well documented in his studies*, we humans make our judgement calls almost entirely on gut instinct, not long-term analysis. Then we justify those calls regardless of their logical basis.

Our gut reactions overwhelmingly respond to the immediate, not the long term, I think.

Politicians are all too aware of that; it’s the last six weeks before an election that matter, not the 2 or 3 years before that. Most marketers also exploit that human trait.

You may have missed the best opportunity by not grabbing a rent 2 own when the interest rates were at their peak, but they’ve come down only a little yet, with more anticipated; and the market has not yet responded with a big surge. So, this is still a good time to consider rent 2 own.

The benefit will likely decline as interest rates continue to move downward.

At least, that’s how I see it. . . .

* see Jonathan Haidt, The Righteous Mind: why good people are divided by politics and religion.

NicaTika Update

Why a tour called NicaTika: The heart of Central America?

First, if you look at the map, you’ll see that Nicaragua and Costa Rica are sort of central among the  seven Central American countries, not at either end. They are at the “heart”.

Second, it’s because these two countries are neighbours that represent the best of Central America’s diverse geography, especially the landscapes and the flora and fauna. They have it all: lakes, volcanoes, jungles, exotic animals and birds, mangrove marshes, agricultural highlands, hot springs, waterfalls, Pacific and Caribbean beaches, and vacation opportunities.

Yet, in some ways, in culture, political life, and development they are quite a contrast to each other. So, you get a good exposure to the broad scope of Central American life.

Third, the title. As you might have guessed, Nica is short for Nicaragua. They use that short form for a variety of things; for example, the Nicaraguan motorcoach company is called the “Nicabus.”

But why Tika? Because Costa Ricans are called tikas and tikos (depending on female or male), just like people from the U.S. are called Americans, or those from Canada, Canadians. And, guess what! The Costa Rican coachline is called the “Tikabus”. (Not that we’ll be travelling on either the Nicabus or Tikabus; we’ll have our own private transportation.)

So, there you have it: NicaTika: the heart of Central America.

To join me, or simply to get more information on this 18-day tour of a lifetime, March 30 – Apr 16, 2025, click here.