You do not have to be a financial advisor to know that interest rates keep going up which means for home buyers and sellers, things are about to get more expensive. Buyers are concerned because the cost to cover a mortgage may be much higher than they planned and the inflated rates could push them past the point that they can buy, especially when you factor in the income-to-debt ration.
For homesellers, the increase in interest rates is not a good thing either. While it may not cost them money right now, the hikes do mean that you will have fewer people interested in your property or eligible to buy it. That forces homes to be on the market for far longer than they had originally planned and homeowners are stuck waiting to offload their property without lowering the asking price for their home.
Understanding Why Interest Rates Are Going Up
Interest rates are going up for some very good reasons. The first and most important reason has to do with the fact that inflation is still causing the cost of goods and services to skyrocket. Without raising rates, the cost for these goods and services can go well beyond that of what the average middle-class income family can afford. By raising rates, there are fewer shoppers for options like vehicles and homes, as well as fewer options to borrow money. That means people will have to tighten their wallets until prices start dropping.
Unfortunately, prices are not dropping yet as goods and services are as expensive now as they were a year ago. While it may not seem like the plan is working, the fact is that there interest rate increases are working and they are keeping home values and other products from continuing to go up.
Why High Interest Rates Could Benefit Homesellers
While homeowners are not thrilled about the increase in interest rates, there are some benefits to the hikes, especially if you are planning to sell your home this year. One of the main values is that these higher rates are actually clearing out those who are not realistic options for buying a home. The standards needed for someone to purchase a home right now are much higher. This includes downpayments, income-to-debt ratios and being able to afford higher interest costs.
Because of this, homeowners are only getting contacted from people who are serious about making an offer and truly want the property. Some will want it for the cheapest amount possible, but there are those who will find your property to be of good value and they will want to pay near or at asking price. However, you also have to keep in mind that the demand for your property will have more to do with its condition and price than what the market is currently doing.
What You Can Do To Maximize Your Value
Interest rates can double from where they are at now and it would not change the fact that there will still be plenty of potential buyers for your property. Instead of 100 people, you may be down to 10, but you know that those 10 are qualified and serious about your property. However, while it’s great to thin out the herd in this sense, the responsibility of improving the property now falls to you. If the property needs a lot of work, that’s fine, but you need to realize that it will severely impact the value of the house. Why? Because construction costs are also at record highs and that means the cost to upgrade the property will be staggering, costing anywhere from $50,000 to $250,000 depending on the condition of the property.
If that’s the case, homeowners need to understand why buyers would want to offer the lowest amount possible. The more work your house needs, the less you should expect to get for it. However, if you were to invest your time and money into making those upgrades yourself, you may get a double benefit in that you not only get your asking price, but potentially more. Because you’ve gone through the work and costs of making upgrades on the property, you get to charge more for having it completed as it does raise the property value considerably.
Focus On Patience When Selling
Before you consider listing, it’s good to talk to an experienced realtor who can review your property and offer their recommendations on what a fair asking price will be, the current state of the market, how homes in your area are selling and more. Their experience and inside knowledge of the industry allow them to guide you throughout the process while also setting realistic expectations.
In this type of market, homeowners are having to wait longer in most cases for a reasonable bid. However, those that can wait are getting the best offers as buyers are seeing prices and interest rates go up around them and with a scarcity of inventory, they know that if you’re not going to budge on your asking price, they need to make a better offer if they want the property.
If inventory was higher, prices would have already stopped dropping. However, because of the low inventory, home prices and values have stayed solid, meaning that property owners are getting their asking price, just not as quickly as they would have hoped for. If you can be patient and you have a nice property, you will get fair value for it, you may just have to play the waiting game for a bit of time.
If you are not sure how to move forward with your current property or have questions involving real estate decisions, connect with an experienced, local realtor. They know the area and can give you the best guidance as far as whether or not is the right time to sell, upgrades you can make that will increase your property value and more. You should not have to do this alone and the right realtor can make a major difference on the process and outcome of your sell.