Interest rates began to plummet as soon as the pandemic broke out, which had an instant impact on the housing market. Not only were people hurrying to refinance their current loans, but many prospective homebuyers were also hurrying to benefit from the increased purchasing power that those cheap interest rates were offering.
For their side, sellers found themselves in unexpectedly advantageous situations: Almost every property that went up for sale quickly attracted multiple bids, many of which exceeded the asking price. Potential purchasers were at sellers’ disposal, and they could select and select bids, eschewing contingency agreements and standard home inspections.
It’s Still a Good Time to Get a Mortgage
Interest rates on 30-year fixed mortgages were still below 6% as of early July, while rates on 15-year fixed mortgages were still below 5%. Even if it’s not as high as the record 2.65% from January 2021, the present rates are still very low by historical standards.
If you’re old enough, you probably have clear memories of the days when mortgage interest rates were as high as 12%. It’s a long way from where we are now to a time when interest rates that high could return.
The rise in mortgage rates may cause some inconvenience for prospective buyers, essentially requiring them to lower their expectations for the amount of money they can afford to spend up front or for how much house they can afford, but it shouldn’t deter them.
1. Recognize that some of their potential buyers just got knocked out of the market.
High-end homes, in particular, may have a harder time selling quickly as buyers adjust their wallets and start looking “down market” for less-expensive homes.
If you’re a seller, you may have to recognize that you can’t expect the offers from buyers to start flooding in the moment your home hits the market – even if that’s what happened for your neighbors just months ago. If you want the most value out of your home, you need to be patient for the right sale.
2. Understand that they may not receive the same kinds of bids they would have before.
Buyers are going to be more careful about their money now, so expect those wildly-above-listing-price offers to dampen (or stop). Buyers won’t have the financial ability to make up the difference if there’s an appraisal shortfall, either, so you can expect most or all of the offers you receive to have contingency clauses attached that are tied to appraisals.
This also means that it’s going to be critical to price a house appropriately. Right now, the fluctuations in the market may make it harder than ever to use “comps” (comparisons with recent sales) to estimate a property’s actual value. Experienced guidance is going to be key so that you don’t overprice your home.