The insane amount of buyers in the market since 2020 has driven prices high while inventory remains low. Buyers have been motivated by the lowest interest rates ever recorded. Essentially borrowing money has been so cheap it has offset the higher sales prices.
Let’s look at an example :
From my neighbors at HAR.com just to the West in the Houston, Tx area you can see how price points from $360,000 to $440,000 are impacted by rising interest rates.
A mortgage payment on a $400,000 home at a 3% interest rate is $1,686 while that same home yields a monthly mortgage payment of $2,147 at a 5% interest rate. As of today (April 29, 2022) the average interest rate is 5.9% on a 30 year conventional loan.
The market has been flooded with traditional buyers and investors since rates dropped to historical lows in 2020. Conventional home buyers have been able to battle it our for the home of their dreams because interest rates have been so low. Investors have come crawling out of the wood work to borrow money at low interest rates to build their investment portfolio. The low interest rates have perpetuated the Seller’s market to what it is today.
Where do we go from here?
Sellers, pricing your home right and hiring an experienced, modern agent, like me, to properly market your home from contract to close is essential. As interest rates climb over the rest of this year we will see Buyer’s buying power decrease. Pricing your home is the first impression to the market, make it count.
Buyers, when interest rates rise cash is king. Traditional buyers need to be prepared to have some additional cash on hand for down payments to offset how much money you need to borrow. Borrowing a smaller total amount at a higher interest rate can put you in a position to have an affordable monthly note despite what the feds do to the rates.
Investors: cash flow is king. Using cash to buy equity in your properties will allow you to turn those properties more quickly to grow your portfolio. I help investors find deals so they can achieve their real estate goals. Income producing properties are the dream, and second to that are properties in desirable neighborhoods with room for improvement so you can set the rental rates. The amount of cash flow you have on hand to purchase and/or purchase and rehab will cut the stress of rising interest rates.
Whatever home goals you have, don’t let this market keep you from going after them! Hire me as your Realtor and I will guide you to achieve success.