Make a Deal Now, or…?

Did you see how the buyers dried up in a matter of months once the Fed started raising interest rates?

Buyers held off. Sellers found themselves sitting on high-priced properties. Many refused to see the light and drop their prices. Buyers saw increased inventory and said, “Heck. I’ll just wait for prices to come down.”

Well, the fed is going to raise interest rates again in September by 3/4 percent.

Crucially, that increase in interest rates could erase any price drops we’ve seen over the last couple months. Interest rates could also put more buyers on hold.

So, this is why you need to make a deal now.

If you are a buyer, the increased interest rates will increase your cost of owning a home. A $400,000 home with 5% down at 4.5% interest costs about $1,925 per month (principle and interest only). Increase interest rates to 5.25% and that home now costs $2,100.

That is not nothing when you pay that every month for 30 years –$63,000 on a 30-year mortgage, to be precise.

In other words, even if prices continue to drop, they are not dropping fast enough to erase the extra interest cost.

On the seller side, if you’ve been holding out thinking that the buyers will come back, or if you are still seeing those December 2021 dollar signs in your eyes, you need to make a deal now.

When buyers come to you, they are going to offer less so that they can offset those increased interest rates.

As we’ve been telling our clients recently, you don’t want to be chasing the market downward because you were not realistic about prices when they started to drop. Imagine yourself standing on a hill with a ball. The ball begins to roll down. If you watch it roll, you will have to run further to get a head of it and catch it. If you get ahead of it right away, you can catch the ball before it rolls too far.

Buyer, get out there and make a deal before interest rates erase your savings. Don’t assume that prices will drop dramatically enough to off-set interest increases.

Sellers, get a deal now before buyers have to deal with higher interest rates in late September.