Selling Your Home in a Rising Rate Market

This past year has brought with it significant improvements to the wounded market we all lived through last year. With this healing process, the world of a seller became an ease as the constraints of limited inventory, low prices, and low mortgage rates all converged. Slowly listing prices began to rise and now, mortgage rates are following suit. “There’s no one in the business right now who doesn’t think the market hasn’t taken a step back. The evidence is all around us,” said Glenn Kelman, chief executive of real-estate brokerage Redfin. (SOURCE) A good rule to follow is that 1% increase in mortgage rates will equate to a 10% reduction in affordability or purchasing power a buyer has. The most recent leaps in rates have made homes just about 10% more expensive to buyers who need to finance their purchase.

So how do you sell your home in this market condition?

  • First, you must remember, even at 5%, rates are still low and homes are still affordable when you look at historical standards. With that being said, this is a stock to the buyer’s side of the market. Buyers oftentimes shop for a home based upon their monthly mortgage payment which does mean they will be looking at a slightly lower price range for their purchase—but at this point, the market feels they buyers are still actively looking so be sure if you are on the fence, you get your house on the market!
  • It is all about balance. The market that will take the biggest hit is most likely to be the high end of the market. Oh the other side of the spectrum, the market that will perhaps most benefit from this new market environment would be that of the real estate investors. Investors who have been taking advantage of the low rates and buying properties to rent will see the influx of renters come back to the market as they see their buying potential dwindle. Because of both these factors, home inventory will finally catch up to the demand and the market will stabilize so that both buyer and seller alike are entering a more stabilized marketplace.
  • The hit to home prices is still out there in the future and has not happened yet. It is more of a shockwave impact where the news hit, sellers and buyers have time adjust and react and then the market adjustments happen. Here in Montana we get an even bigger buffer zone because we are always a few months behind the national trends. If you are looking to buy or sell right now, the market is still in a very advantageous place for you. In fact, pending home sales are reaching new highs.

 

“The number of pending home sales seen through the end of May increased 6.7 percent from April and 12.1 percent on an annual basis, bringing the current level seen nationwide to its highest point since December 2006, just prior to the start of the housing meltdown beginning in earnest, according to the latest Pending Home Sales Index from the National Association of Realtors.” (SOURCE)

 

Hart Real Estate Solutions

www.hart.realtor

406.585.0000

Hart Real Estate Solutions Bozeman Montana


  

 

Comment balloon 13 commentsHart Real Estate Solutions • July 11 2013 09:49AM

Comments

Even with rising prices, the interest rates are still attractive.  Wasn't that long ago they were above 7% and rising.

Posted by Edward & Celia Maddox, EXPERIENCE & INTEGRITY - WE TAKE THE HIGH ROAD (The Celtic Connection Realty) over 5 years ago

Great explanation for the public. For us old-timers, current interest rate environment, while rising, is still AWESOME!

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Residential Brokerage | Charlotte, NC) over 5 years ago

Tim, your clear explanation about what a 1% rise in interest rates will mean to a buyer makes it very clear. Something a buyer who has been looking for months needs to understand and talk to their mortgage broker.

Posted by John M. Scott, Broker / Owner San Francisco Bay Area (BRE # 01442690, Scott Keys Properties) over 5 years ago

I am so grateful for the Real Estate Market's progress. Last year was pretty good and this year for us is even better. I am so optimistic about the rest of this year.

Betty

Posted by Team Honeycutt (Allen Tate) over 5 years ago

Our local markets have been super hot for months but they are slowing down.  My advice to sellers is to look at the overall trends in the past and price in line with that trend.  Even in a market like ours where prices are rising 1-2% per month, being 30 days behind still puts the home in the appropriate price range for a quick sale.

Posted by Bryan Robertson, Broker, Author, Speaker (Intero Real Estate) over 5 years ago

You are exactly right on your first point.  Rates are still at such an all time low I want to refi every week.

Posted by Jay & Michelle Lieberman, Creating Calm in the Buying and Selling Chaos (Keller Williams World Class) over 5 years ago

It's still a good time to buy! Thanks for sharing this detailed explanation with potential buyers.

Posted by Ralph Gorgoglione, Hawaii and California Real Estate (800) 591-6121 (Maui Life Homes / Metro Life Homes) over 5 years ago

If you have to sell, price the home just under the competiion, so that you can sell it fast. WE ARE IN A BUBBLE & those controlling the market are doing this on purpose. Nothing is happening by accident.

Posted by Jimmy Faulkner, The Best Of St. Augustine (Florida. Homes Realty & Mortgage) over 5 years ago

Thanks for all your comments all!   Tim

Posted by Tim Hart over 5 years ago

Tim, nice and simple tips on how to sell the home in UP market - and as of now, buyers are afraid of interest rates which is driving the market in RIGHT direction!

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 5 years ago

We still have very low inventory so we are in multiple-offer situations.  The rising interest rates and an increase in inventory will help prices stabilize and not spike so that we need another market correction to keep housing affordable.  I do not look forward to another irrational increase in home prices followed by a much needed correction.  I believe that if  the government gets out of the way and lets the market forces work, they will stabilize and work much better.

Posted by Roger Stensland, Let's Move! (The Cascade Team Real Estate) over 5 years ago

Thank you for the post. I hope rates do not rise too much. In the past buyers did not worry as much because homes appreciated faster.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) over 5 years ago

Tim ,

Your piece is a good primer for prospective buyer's. Let's keep in mind that while mortgage rates are still very attractive by historic standards, over the years, wage stagnation along with a host of other factors must be taken into consideration when making a determination as to the viablility of today's overall market conditions. A modest rise in interest rates can make the difference between finding an acceptable property in one's price range or retiring to the sidelines. Because the purchase of a house is still considered a "big deal" for most buyer's, settling for something less than what fills your needs or desires, would be considered a turn-off for most buyers. Common sense tells us that as the cost of borrowing money and the price of a house increases, people will be paying more or buying less. Builders will have to plan ahead to compensate for incremental increases in the cost of materials, labor and mortgage interest rates. Will this lead to a reduction in the size of new homes - with fewer amenities offered? It is now decision time for many who are sitting on the fence. No one can accurately predict what conditions will exist twelve to eighteen months from now. "Carpe momentum et cetera sequientur." English translation - pluck the moment and the rest will follow.....   

Posted by Sharon Miller (RE/MAX Platinum) over 5 years ago

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