Interest rates are up to compete with inflation and to slow down the borrowing of money, especially for things like cars and homes. Higher interest rates make homes more expensive than ever to buy. Median family homes in most areas will now cost new buyers $3,000 a month or more as far as a mortgage payment goes.
That severely narrows the field of people who want to buy or who are eligible to buy. One of the biggest drawbacks to sellers when interest rates go up is that the majority of potential buyers will not qualify for the loan because of their income-to-debt ratio. However, despite the disadvantages that come with higher rates, there are some advantages.
Possible Benefits Of Higher Interest Rates
Believe it or not, for many buyers, the hike in interest rates has offered several benefits. Yes, they would probably like to have homes be half the cost and interest rates be a third of what they currently are, but the current market gives them opportunities like:
- Less competition: It’s not going to be difficult to find the right property when 70% off the buying field has been wiped out. Yes, that many potential buyers are gone from the market because of these rates.
- Friendlier sellers: With a thinner buyers market, sellers have to be a lot friendlier and that means working around what you want. This may not always mean lowering prices but could include things like covering repair costs or making needed upgrades.
- More inventory: Buyers now have more homes to choose from than they have had in years. Even better, they can ask for private showings of properties and really get a look at what they might be buying.
- More creative options: Thinking about doing a rent-to-own deal or maybe work with someone who has an assumable mortgage? Sellers who want to get rid of their property do not care what interest rates you have to pay as long as they get the deal they want.
- Better profits on flips: Investors like higher interests as well. You can get a better purchase price on the property which allows you to flip it for a higher profit if you make solid repairs and improvements.
While every buyer and situation are different, it’s worth investing time into researching where your local market is and how you can take advantage of it. Speak with a realtor to get a better idea and to learn what your best options are.
