Whether you are buying or selling, an increase in interest rates may affect you. I am here to explain.
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Today we are going to discuss what happens when rising interest rates affect buyers and sellers. What are the dynamic forces that interplay with the rising interest rate?
Buyers who have been sitting on the fence and looking for a great deal will have a tendency to become more motivated when they see rates rise. This is because when the rates rise by even 1%, it will affect a buyer’s qualification by 7% to 8% of the purchase price. Buyers become more motivated to find a home that is a match and make a move before the rates increase even higher.
Meanwhile, sellers will realize that in a rate-increasing environment, that buyers are going to qualify for less money. When considering offers on the table, sellers will know that there is the possibility that the longer they wait the fewer buyers will actually qualify for that sale.
Rising interest rates will affect buyers and sellers.
Buyers who are waiting for rates to decrease may be disappointed because the rates may actually level off or continue to increase. This can sometimes cause buyers to disqualify, particularly in markets that are very hot seller’s markets with multiple buyers bidding on properties.
Finally, sellers will oftentimes realize that their own affordability in the market for a new home will be restricted. Once the sale is consummated, sellers have to find a new home and the rising interest rates will affect their affordability as well.
If you have any questions about this or about buying or selling, please feel free to contact me by phone or email. I look forward to speaking with you about your real estate needs soon.
