Interest rates are rising like the mercury in July! There seems to be more houses on the market, but getting the home you want for the price you want may still feel like trying to nail Jello to the wall. What’s going on?! Here’s a breakdown of what we are seeing in the marketplace and what it could mean for you if you are planning to buy or sell this year.
1. Rising Interest Rates decrease the amount a buyer qualifies for to spend on a home. As I write this (January 2019) interest rates are hovering around 4.45%, up from 4.04% just a year ago, and Realtor.com is forecasting that the interest rates in 2019 will hit 5.5% by year end. Even though it’s becoming more expensive to borrow money, homes are still appreciating (at a slower pace) and Realtor.com expects that the median appreciation rate will be 2.2% this year.
WHAT THIS MEANS FOR BUYERS: Robin and Jay started house hunting in January 2018. They were pre-approved for a $500,000 loan with a 4.04% interest rate. They searched for awhile before growing frustrated with the competitive market. They were sick of getting rejected offers so they decided to take a break. But now, 2019 is the year. This is it!!! They went back to their bank only to find out that with the new 4.45% interest rate they can only borrow $476,000 and, to make things worse, with 3.5% appreciation, those $500,000 homes they saw last year now cost $517,500.
WHAT THIS MEANS FOR SELLERS: Even though your neighbors house got 75 offers in 2 days last spring, the same may not happen for you even if your home is better. There are fewer buyers who can afford your house and the buyers are catching the drift that the market is not quite as hot as it used to be and may not make offers as quickly as they have in the past.
2. Inventory Is Up: A one day spot check of a few surrounding towns shows that this trend is already underway in our area. Comparing 1/17/18 to 1/17/19 gives us a snapshot of how inventory levels compare to one year ago: Burlington inventory is up 233%, Woburn is up 125%, Stoneham is up 100%, Reading is up 80%, and Bedford is up 27%. These seem like big numbers and might have you start thinking that the market has tipped, until you remember that we have had a low inventory problem for awhile and this is just a little bit of catch up.
WHAT THIS MEANS FOR BUYERS: Robin and Jay are not feeling as rushed by competition from other buyers and they are happy there are more homes to look at. But, they are not thrilled that the homes they can afford today don’t look as nice as the ones they were making offers on last year so they decide to take it slow when deciding whether or not to make an offer, though their cramped apartment seems to be closing in on them.
WHAT THIS MEANS FOR SELLERS: Since the Buyers have more homes to look at it will take more time for them to see your house and decide whether or not they want to make an offer. They may have seen more than one home they like and are weighing the pros and cons for far longer than you’d like. I recently had a buyer make an offer on a house 3 weeks after seeing it for the first time!
3. Since the increased inventory still isn’t enough to satisfy demand, and rising interest rates don’t knock ALL buyers out of the running, it is still a seller’s market around here (at least for now). We are going from 300 miles an hour to 200 miles an hour… slower than before but still Very Fast. So while homes may not be gone in a puff of smoke within 48 hours of being listed, they are still selling pretty quickly (many in under 45 days).
WHAT THIS MEANS FOR BUYERS: Robin and Jay saw a house that they liked, but wanted to think about it before making an offer. They decided, 8 days after seeing it, that they wanted to go for it. When they called their agent they found out that 2 offers came in over the last 24 hours and the house was no longer available. How can that be? It’s been sitting on the market for 21 days and all of a sudden it’s gone with multiple offers? Discouraged, but still wanting to get that dog their landlord won’t allow, they keep looking.
While there isn’t as much pressure to beat out other buyers as there was a year ago, there is the reality that the longer they take to find a house the more expensive it will be, both because of increasing rates and price appreciation.
WHAT THIS MEANS FOR SELLERS: Don’t be discouraged if your home doesn’t sell the first weekend… even if the ugly one down the street was snapped up on day one when it sold last March. It doesn’t mean your house won’t sell and it doesn’t necessarily mean it’s not priced right. As a Seller every DAY on the market pretty much feels like a YEAR, but if all activity indicators are good your house will sell when the right buyer comes along… and don’t be surprised if multiple offers show up out of the blue!
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