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Rising Mortgage Rates
Whether you are thinking about buying or planning to sell, it is critical for you to understand the role mortgage rates play on buyers purchasing power, and sellers listing prices.
But first, some definitions…
Mortgage rates:
the rate of interest charged on a mortgage loan.
Buyers purchasing power:
the amount of home you can afford to buy and is within your financial reach.
Seller’s listing price:
The sales price of a property when put on the market.
How the fluctuation in mortgage rates affect the two:
Buyers:
Mortgage rates directly affect the monthly payment buyers make on their home purchase. Even the smallest increases in mortgage rates can significantly impact their purchasing power. Typically speaking, for every 1% increase in mortgage rates buyers lose 10% of their purchasing power. In other words, when rates increase, so do monthly payments forcing many buyers to purchase less expensive homes to make up for the difference in interest and vice versa. With rates currently increasing, buyers need to beware that further mortgage rate increases could potentially limit their future purchasing power. If you are in the process of buying a home, it is of the utmost importance to have a strong plan. Connect with us so we can help you.
Sellers:
Rising mortgage rates result in a reduced number of overall buyers. With that said, we will likely begin to see the outrageous sales prices begin to decrease. Over the past couple years, we have witnessed a strong sellers’ market coupled with mortgage rates at an all-time low. This gave buyers the ability to purchase more home for low monthly payments. The limited inventory (homes for sale) resulted in wild selling prices. As buyers begin to get priced out of the market and mortgage rates begin to increase it will be of the utmost importance to carefully price your home for the market. You don’t want to risk coming out too high and getting stale or missing the opportunity to maximize interest. Skilled brokers will take into consideration and evaluate numerous factors when pricing expertly. It is not just the condition and location of the home, recent nearby sales, price of similar homes currently on the market but also mortgage rates, buying power, and other local variables. If you are thinking of selling connect with us so we can position your property to stand out in the current market.
Freddie Mac is saying. “History suggests that when rates rise, there is an initial bump in home prices, as many move quickly to buy a home before rates increase further. But after that period, home prices slow. Freddie Mac analysis shows that a 1% increase in mortgage rates results in home price appreciation that is four percentage points lower. For instance, a 1% increase in mortgage rates would change home price growth from 11% to 7%.”
Where we are at today:
Currently, the average 30-year fixed mortgage rate is above 5%. Experts anticipate that mortgage rates will continue to increase in the months ahead. If you are a buyer you have an opportunity to get in ahead of that increase by purchasing now.
Expert tip:
It is critical for you to get preapproved as early as possible to get todays rates locked in and prepare yourself with a plan incase rates are to go up. Additionally, sellers have a unique opportunity to still capitalize on the current situation if they are to list now before more buyers are completely priced out of the market and home prices are still strong. The graph below illustrates how mortgage interest rates drastically impact purchasing power and ultimately reducing the number of buyers bidding on homes in the higher price ranges.
Whether you are considering buying or selling let’s connect so that you have a trusted real estate advisor on your side who can help you strategize to achieve your dream of home ownership.
Love Letters to the Sellers
LOVE LETTERS TO THE SELLERS
There’s nothing quite like falling in love… with a home.
Every buyer has had that moment where, after what seems like an eternity of searching, they found “the one.” The home that’s vaulted ceiling, wood floors, large backyard, or perfect layout bring so much joy and visions of the future they “have to have it.”
For buyers, purchasing a home is as much of an emotional decision as it is financial/practical one. The same is true for the seller. The offers sellers receive aren’t just for a piece of land and a house; they are for a home. A place where they’ve spent hours of their life with family and friends. A place filled with memories of both tears and laughter. This emotional connection is something many buyers have been able to use to connect with sellers and possibly get a leg up in the offer process.
How? They write a love letter to the seller!
A love letter to the seller is a letter the buyer writes and delivers along with their offer to tell the seller a little bit about themselves and why they love the home. Although this practice isn’t necessarily new, it is steadily gaining in popularity. Like mentioned before; selling a home is an emotional decision. Bringing humanity into the transaction can often sway a seller in favor of the buyer they feel they know.
There is a flip side, though. Letters to the seller aren’t always the right choice. For some sellers the property might be one of investment instead of residence or the letter might backfire and cause more issue than it resolves. One Windermere agent recounted the time a buyer’s letter described how much she looked forward to her daughter growing up in the house. It turned out the sellers were not able to have children and the letter had brought up some rather unexpected negative feelings.
Love letters can also pose some legal complications for the seller. Anti-discrimination laws imposed both federally and locally do not allow sellers to select which offer they will accept on the basis of protected class identity (race, religion, gender, familial status, etc).
Suppose a seller gets a handful of similar offers on a property and a few have submitted letters along with their offer. If the seller verbally expresses to their agent, neighbor, or even a friend that they chose the buyer based on familial status (“We liked them best because they were a young family”), they are inadvertently put at risk for a fair housing lawsuit.
This doesn’t mean love letters are illegal. It simply means both buyers and sellers should be mindful when sending and receiving letters. All housing decisions should ultimately be made on the terms of the offer, not the identity of the buyers.
Sellers should always review all offer documents with their agent and ask about fair housing laws if they are confused or concerned. The most important thing is to make sure their final decision is not made based on the buyer’s demographics, but on if they are willing and able to purchase.
Buyers should try and understand the history and motivation of the seller. Did they live in the house? Design the home? Lose a spouse there? This information can help a buyer understand which topics are safe to mentions in the letter and which topics to avoid. However, the best practice for a buyer in EVERY letter to the seller is to focus on the home. Talk about the features you appreciate, what drew you to it, and overall why you think it’s the perfect home for you.
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