Interest Rates Are Climbing... Should I Pause My Home Search?

Interest rates are no longer in record low territory, home values are up, available homes for sale are down, and inflation is tightening our pockets with every day essentials.

These are facts that have prospective home buyers pumping their brakes and questioning their next move.

But do these facts mean it’s time to panic and put our goals and dreams on hold? Sometimes facts are just… information. Information should not scare us. It should simply help us to make educated decisions.

Let’s take a moment to think this through!

• Interest Rates

  We all know how HOT the real estate market has been. Home buyers enjoyed historically low rates and home values surged.

  The rapid rise in interest rates over recent months feels a bit like having ice water dumped on your head. After the initial shock passes, the temperature will ease and we will settle into a more balanced market.

  The record low rates that hovered around 3% in recent years was crazy! If you locked in a property OR refinanced your property in the past few years… Cheers! Those low rates were an incredible moment in history.

  Where rates are now is NORMAL! Raising the rates back to the 6-7% range was necessary in order to stabilize the market.

• Home Values are Up

  Those low rates we saw gave Buyers the ability to push prices up without severely impacting their monthly payments. As a result, values in most areas surged! Now that rates are normalizing, we will likely see home values begin to level out OR drop a bit depending on the location.

  Even if some areas see a correction, we need to remember the long term value trends. Real Estate is like a strong stock… there are ups and downs, but the long term trend is an upward climb.

  I tell all of my clients that they need to feel excited and comfortable with their purchase. The price of the house is of course relevant, but a buyer’s total monthly payment is the most important number. Focus on properties and locations that will keep you within that preferred monthly payment!

Home Ownership is an incredible way to build wealth!

The rate of home value inflation will slow from the wild ride we’ve been on, but property values WILL continue to rise over time. The longer you wait to invest in a property, the longer you delay your ability to grow your real estate wealth.

• Available Homes For Sale are Down

  Low housing inventory absolutely presents a challenge for prospective home buyers. Many areas are still experiencing a significant shortage of homes for sale while the Buyer demand remains high.

  In a low inventory environment you may need to shift your expectations. It’s time to revisit your ‘must have’ list and consider expanding your preferred location. You may also need to be willing to take on some projects.

  This low inventory may take years to come back to more balanced levels, so waiting for more properties is not the best strategy if you are ready to buy. Understand the current environment we are in, have patience, and work with your Realtor to create a plan.
  

• Inflation is Tightening Household Budgets

  This is a reality that everyone is navigating. It also is something buyers need to consider when talking to their lender about what their monthly payment looks like.

  Don’t Panic! Adjust!

  Take a moment to calculate how the inflation with food, gas, etc. is impacting your monthly household budget. Adjust your home search budget accordingly. This may change your maximum allowable purchase price, but you will thank yourself later for being financially responsible!

EMILY’S THOUGHTS:

• It’s important to remember that homeownership is a long term investment and a phenomenal tool to build wealth.

• Delaying your home purchase is delaying your success. You can’t climb the mountain until you take the first step!

• Be responsible! Make sure you are comfortable with the monthly payments at the CURRENT rate. Over the coming years we may experience a dip in those rates again, which may give you an opportunity to refinance to a lower rate (Awesome!). However you should not assume this will happen. Always budget based on the current environment to assure you are financially secure.

• Values will continue to rise and you will build equity! Well maintained Real Estate investments steadily increase in value. On average, a primary home purchase is intended to be a 7-10 year residence. Over 10 years, you will see a positive return!

• If adjusting your budget means that you have to make some sacrifices to your dream home, remember that the equity you build over time can be utilized to help finance some updates. Updating a home will also increase it’s value! Talk to your financial advisor to better understand these options.

The ebb and flow of the real estate market is nothing new and nobody can time the market. If you are waiting for conditions to be perfect… you could be waiting forever!

If you have a goal of Home Ownership or a Home Sale, talk to your real estate team and make it happen!

I am more than happy to discuss further with you and to help you create a plan that works for you. Reach out to schedule a time to chat: emily.woods@compass.com