The talk of the town is about the constant increase in interest rates that we are experiencing this year. At the beginning of 2023 the interest rates had climbed from the low 4s into the low 5s. That drastic change at that time caused many people to halt the home-buying process waiting for the interest rates to come back down. Those that continued to shop took advantage of the 5% interest rates and purchased a home while those who waited later regretted their decision. I hate to be the bearer of bad news: Interest rates will continue to rise. Along with this bad news, I also bring some good. When purchasing a home there are ways that we as real estate agents can protect future homebuyers from overpaying, devaluing their long-term investments, and close the gap between high-interest rates and overpaying on your future home.
What Is A “High” Interest Rate?
In the 1980s-1990s homebuyers were no strangers to interest rates that were close to 19%. Over the years they have slowly crept down, but it begs the question “Are we really experiencing high interest rates?” Interest rates fluctuate so much for a number of reasons, but it usually comes down to just a few: economic stability, supply & demand, credit risk, loan period, and inflation. Here in 2023, we are starting to see increases from the Federal Reserves due to our need to stimulate the economy post-COVID-19 era and a rise in inflation. As a homebuyer, you have no control over the interest rates, but you do have control over how to ensure that your future investment continues to appreciate more over time, and how to avoid initially overpaying for your new home.
Avoid Over Paying For Your Future Home
In 2019-2022 homebuyers were paying thousands of dollars over the asking price for the seller to even consider entertaining a buyer’s offer on their home. When you think of supply and demand at that time you will realize why this was happening. Interest rates at the time were at an all-time low, stimulus checks were sitting in bank accounts waiting to be spent, and everything non-essential was shut down causing homebuyers to increase their savings. This caused a substantial amount of buyers to start the homebuying process. When inventory started to decrease and the number of homebuyers increased the demand for homes skyrocketed creating a supply and demand issue. Due to the increase in interest rates, the days of paying thousands of dollars over the asking price for a home are over. Depending on the pricepoint, Sellers are now having to entice buyers with buyer concessions and list their home at a favorable pricepoint to have their home sold quickly. In order for buyers to have a successful buying experience it is important now more than ever for a buyer to reach out directly with a qualified and experienced real estate agent. Your realtor will have first-hand knowledge of any up-and-coming neighborhoods, they know their market, they will help you consider future resale value, and check comparable homes in the neighborhood to ensure you’re not overpaying for your new home.
Make Interest Rates Work In Your Favor
In any market, there is pocket pricing that homebuyers are not seeing homes sitting on the market. These price points are usually aimed at first-time homebuyers and investor specials. The location also plays a big factor as well. If you’re looking to purchase a home in a highly sought-after neighborhood, a lakefront or oceanfront property, or near a major downtown metropolis you may find it difficult to find sellers willing to give buyer concessions or pay under asking on a home. In those situations, I recommend consulting with a qualified agent in that area to give you honest feedback on what it takes to ensure you have a winning offer and create a plan for your to have a successful homebuying experience. In most cases, the increase in interest rates has allowed buyers to have sellers pay for buyer concessions such as seller-paid closing costs and home warranties. Buyers are able to find great “deals” allowing them to move into their new home with equity.
Is Now Still A Good Time To Buy?
The answer is YES! The future you will be kicking yourself that you did not get started now. There are so many advantages in buying in a market with higher interest rates. In the event that the interest rates do go back down then a simple refinance can be done. As we all know, prices for homes are only increasing and with the threat of inflation on the horizon now is never a better time. The Ivy Key Team are licensed real estate professionals based out of Oklahoma and have established a vast network of qualified realtors across the United States. No matter what state you are in, contact us today to start the home-buying process.
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