It is a very interesting time in the real estate market. Over the past few years we have seen historically low interest rates resulting in a buying frenzy.
Now with the increase in rates, we are beginning to see the market cool off a bit. The rising rates were intended to balance out the market and that is exactly what is happening - we are beginning to see a more balanced market.
While the market is showing signs of a cooling period, inventory remains low and demand is still high.
We are hearing a lot of talk about how homebuyers will be affected by the increase in interest rates but in reality, the increase in interest rates affects both buyers and sellers. When rates go up, buyers lose buying power. The increase in interest rates means that a mortgage is now more expensive making monthly mortgage payments higher. This can actually price some homebuyers out of the market.
For example, at a 3% interest rate, the monthly payment on a $500,000 home with 20% down, would be $1,686. At a 6% interest rate, the monthly payment for that same home would be $2398. So as you can see, it makes quite a difference.
The good news for home buyer's is that the urgency is gone. You will not only have more to choose from, you will have more time.
From a home seller’s perspective, this means that your pool of potential buyers shrinks. As rates rise, fewer buyers can afford to buy. We are not seeing as many offers now and home prices aren't being bid up as they have been in the past. Although the market is not as hot as it was before the rate increase, remember, we are still in a seller's market and demand is still high - just not as high.
Initial rate hikes always seem to create a panic. It is important for home buyers and sellers to realize that while interest rates have risen, from a historical viewpoint, the current interest rates are pretty normal/average and, the housing market is still healthy.
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