What my clients are saying
My mature and experienced clients know that rates have been much higher than they are today (just 20 years ago they may have purchased a house with a 7% rate). So, today’s rate at just over 5% is still a good rate in their minds, although we’ve been spoiled with those extremely low 3% rates in recent years.
These clients are savvy and experienced to know also that increasing rates can be a detraction for buyers who want to buy now or very soon. So, now the baby boomers and older homeowners in my circle are calling to ask the very serious question…”How quickly do you think my home will sell if we put it on the market now and where do I go if I sell now?“
Here are two scenarios that I’ve seen first-hand.
A first-time home buyer (over 65) approved for a loan in late March prefers purchasing rather than renting because rent has increased by a significant amount for the last 3-years. We have been on the lookout for a home but have not yet found anything suitable.
Reasons for a delayed purchase in this case are:
- wanting a home with all spaces on one level
- low inventory in the area of choice with only one or two potential homes coming on the market each week
- multiple offers on those few homes or they are in disrepair
- and the buyer is searching with a lower-than-average price point (average house values for our local area rose from $278k to $338k)
The first week of May, the lender informed us that the interest rates went up over a quarter percent since the buyer was approved in March so there will be an increase in mortgage payments. This makes the buyer nervous because they are on a fixed income. An interest rate hike above 5.5% may force this buyer out of the homeownership market so time is of the essence.
Most of my clients are already retired, on a fixed income, or have a budget they are adamant to stick to, so overspending for another home is hard to do. I say “overspending” because that is the word of choice among some of my clients who have watched the market take an unprecedented boom of house prices and, while that is fantastic for the seller, it is a hard pill to swallow for the mature buyer.
However, those who need to move are acknowledging this is the market they are in and must move forward regardless. I have a few clients who are in the situation of needing to sell the large home where they raised their families or enjoyed their mid-life empty nest, replacing the space with their hobby or 2nd career or entertaining friends and family periodically. But the time has arrived that the house is simply too large. They are heating and cooling, and cleaning spaces they rarely use so they want to downsize or resize while they can get a good price for their home.
One of my clients wants to move out of their 5,000 square foot home while identifying a comparable smaller home at a mid-range price point – reasonable, at least so we thought.
The search was difficult for these reasons:
- in the madness of the real estate frenzy of 2021/22 even homes in the higher price points were not presented as well as they should have been – a stark difference between photos online and in person
- almost every decent home that came on the market received multiple offers within a day or two
- their competition was no longer just another occupant buyer but now it was large fund investors vying for that property, too
In the case of these kinds of buyers, interest rates don’t bother them too much since, in most cases, they plan to use the equity they have in their current home to purchase the next home or they only plan to keep the mortgage for a few years before they pay it off and live mortgage free. In a couple of cases, they are choosing to use a Reverse Mortgage to help stretch their wealth, therefore, the interest rate is not an issue since they can choose not to make any mortgage payments on a monthly basis.
If you want to know more about how interest rates may affect your decision or that of a loved one to move forward with a sale or purchase, feel free to contact me.