There has been a significant change in the housing market. Anyone that has paid even the slightest attention to real estate in the past 18 months or so is well aware that we are in what is called a "buyers market". Simply put, this means that there are more sellers than buyers and the resulting imbalance has put pressure on the sellers to lower their prices. This has been a great time to be a home buyer, lots of homes for sale, prices have come down and the interest rates have remained low... for now.
Here is where it is going to get tricky. Interest rates are on the rise and by all indications this is a trend that is likely to continue. In fact I had a conversation with a very well connected and long time Mortgage Broker about that. She was telling me that projections are for interest rates to hit 6% in the next year to year and a half.
That is approximately a 50% increase!!!
If you are thinking about buying a home you need to pay attention to this. While 6% is still a manageable rate it will significantly cut into your buying power. So that house that you have had your eye on for the past few months, you know the one, the one that you can afford to buy today but are waiting for the price to drop further, ya that one. Its about to get more expensive to buy it. Even a .5% rise in interest rates makes a house that is $300,000 today have payments equivalent to a $316,000 house. Here is where you say " well, the owner of that house will have to reduce the price". But will they?
First off the price would need to drop to $285,000 for you to have a shot at it. But keep in mind that there are other buyers in the same boat as you. Lets say they were qualified for $330,000 and are now bumped down to $310,000, they get antsy to buy something before the rates go even higher and they come across that little gem that you can no longer afford. OR, maybe the seller is also in the same boat and the house they had their eye on is no longer attainable so they take their home off the market. OR they are already at the lowest price they can go (this is more common than you think) and all the hoping in the world isn't going to get that house price down to $285,000.
If you have been looking at homes for sale and are wondering what the interest rate changes will mean to you, just drop us a line or give us a call and we will be more than happy to get you through the process.