If you spend much time watching news outlets and charting their statements, there is never a right time to buy or sell real estate. It is either pricing, interest rates, housing shortage, or a mired of other reasons why it’s not a good time to buy or sell.
Market Principle:
What goes up, must come down. Every historical view of interest rates proves this market principle to be true. Real estate typically always appreciates. When properties are overvalued, it takes longer for appreciation to catch up.
Media outlets need sexy stories that they can tease to get viewers. However, the paralyzing effects that some experience is frustrating. Depending on which side of the paradigm you are standing on, it’s never a good time to transact real estate; it’s either not good for a seller or it’s not good for a buyer.
Lower Interest Rate Market:
When interest rates are lower, buyers typically stand in line to see houses, face more competition with competing offers, pay thousands to hundreds of thousands over list requiring buyers to pay more out-of-pocket. Sellers typically are less likely to negotiate, less agreeable to make repairs and concessions, and have more offers to choose from to negotiate. Sellers are even more likely to demand appraisal waivers exposing buyers to paying more and being able to negotiate less.
Lower Interest Rate Market Summary:
- Buyers typically spend more out-of-pocket cash
- Buyers typically have less negotiating power
- Buyers typically face more competition
- Sales prices are typically higher on homes and sell for a price over-asking.
Higher Interest Rate Market:
When interest rates are higher, buyers typically face less competition, pay less money out-of-pocket for homes, and experience sellers who are more realistic with their property pricing. Sellers typically are more willing to negotiate, more agreeable to make repairs and concessions, and have fewer offer options to choose from making each offer more valuable to the seller. Fewer sellers want appraisal waivers and are more willing to negotiate appraisal shortfalls.
Higher Interest Rate Market Summary:
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- Buyers typically spend less on-hand cash
- Buyers typically have more negotiating power with sellers
- Buyers typically face less competition
- Sales prices are typically lower on homes
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Most recently, buyers seem to be waiting to purchase a house for interest rates to come down. Granted it is a viable concern but not one that cannot be mitigated. You see there are two markets related to interest rates: (1) the higher interest rate market, and (2) the lower interest rate market. Both markets cause buyers to overcome certain hurdles.
While buyers are waiting for interest rates to fall (which they will again as they always do), others are using the current market situation to their benefit. Buyers currently are facing less competition than they were when interest rates were lower. Buyers are finding that sellers are more receptive to their offers and that the prices being seen in the marketplace are more realistic than in the recent past.
There are always two ways to look at a situation and if you are waiting for the perfect storm to appear in the housing market so that you may go out there and get preapproved and pull that trigger on a home, you may be doing yourself a disservice.
Market Consideration:
Buying in a higher-interest market does limit your purchasing power but once refinanced, typically your monthly housing budget decreases allowing you to save more or have more spending power for other areas. Plus, with sellers being more realistic with their pricing, buyers have a greater opportunity for higher appreciation over time.
If you need to make a move and your current home or rental that you are in is not cutting the mustard, get out there and find a quality real estate broker like Robbie English who can advise you with accurate facts and help you get preapproved. That way, when you see the right home become available, you can pull the trigger and purchase that home.
Moral of the story:
Be more focused on the house and not the rate. In most cases, it’s easier to change the rate than to change the house.
