Who Does The Current Housing Market Benefit?
Like so many of us, Carlos and Laura have been watching the news a lot more often over the past couple of years. At first they heard about how the low inventory of homes was creating a seller’s market, with many homes selling on the day of listing for well-over asking price. But now the news is changing. Now that they have saved enough money for a healthy down payment and are better-prepared to buy, they’re hearing increasing reports about the rising interest rates. There are more homes on the less-competitive market which benefits the buyer’s side of the equation, but the interest rate is rising. Should they go ahead and buy? Should they wait longer? Let’s look at who the current housing market benefits.
Mortgage interest rates have indeed risen by about 2% over the last 60 days. With the rising rates, homes aren’t selling quite as quickly. This has caused a small shift in the supply and demand ratio where homes are concerned. Now that there are more homes on the market compared to how many people are house shopping, prices have stabilized a bit and the competition isn’t quite as stiff. This has resulted in a more “neutral” market instead of solely a seller’s market.
That being said, with every 1% increase in the mortgage rate, buyers lose about 10% of purchasing power without compromising their desired monthly payment. This means that over the last 60 days, buyers have lost about 20% of the purchasing power they previously held. While this doesn’t necessarily affect home prices, it does increase the number of days homes sit on the market before being sold.
So, buyers are benefiting from less competition and lower prices, but they have to deal with higher interest rates. Sellers are still benefiting from increased prices, but are having to wait a bit longer to get their house sold. No matter which side of the fence you’re on, you can still be successful. As a buyer you can improve your chances at getting an accepted offer by being well-qualified and pre-approved. The more cash you have to put down the better, too. As a seller, presenting a well-maintained, move-in ready home that is free from clutter will allow you to capitalize on the market and fetch the best price without sitting for weeks.
Carlos and Laura decided to write the offer on the home they love using today’s higher interest rate, and they plan on refinancing in the spring as rates move lower. It didn’t make sense to them to ensure the competition expected when rates decrease.
Do you agree or disagree with Carlos and Laura? Let us know in the comments below!
If you’ve got questions regarding the impact of the shift on your search or the value of your home, we’ve got answers!
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