Rising interest rates on home mortgages are making some buyers wary of purchasing a home. According to Forbes, for the week of September 19th the current average rate for a 30-year fixed mortgage has reached 6.39%, up 23% from the previous week. In just the last six months, mortgage rates have jumped over 200 basis points. We can’t escape inflation and the rising interest rates that go along with it but, what does this mean for the housing market and for buyers? Is now a good time to buy?
More Leverage and Buying Power
One reason why now is a great time to buy is because the rising interest rates have dampened intense buyer demand, but also eased bidding wars. For buyers, higher interest rates can be viewed as a positive, giving them more leverage and buying power. With the mortgage rates being significantly higher than they were even one year ago, home sales have started to decrease, and buyers may no longer feel the urgency to make an offer on a home the second it hits the market. The incredible sense of urgency has leveled out, giving buyers more time to negotiate and browse all options available.
Inspections are Back
This also means buyers don’t necessarily need to continue to waive any or all contingencies. With the housing demand being so high for the past two years, buyers were previously willing to waive important steps such appraisals and inspections. Now buyers have a bit more leverage. According to an August 2022 study by Realtor.com®, 95% of buyers requested a home inspection. Further, 67% of sellers negotiated with the buyers for repairs resulting from the findings in the inspection. This is a great turn for buyers who previously had to waive these steps and potentially miss out on vital information or perils regarding the home.
Offers Above Asking Price
With the marketing turning in favor of the buyer it also means no longer having to make an offer high above asking price. According to the same survey by Realtor.com®, when mortgage rates were below 4% around February and March 2022, about 82% of homes were sold at or above asking price. Now with interest rates around 6%, the number of homes sold at or above asking price has dropped to 69%. This data shows that the market is shifting and settling back down from the frenzy the housing market has experienced the past two years.
We’re Still in a Seller’s Market
While this is all great news for the buyer, it doesn’t mean things are turning dire on the sellers side. This simply means the playing field is beginning to level out for both parties. According to the National Associate of Realtors®, existing home sales dropped 5.9% from June to July however, the median home sale price is still 11% higher than it was a year ago. Further, most economists do not predict that housing prices will fall in the near future. Economists have predicted a 9.9% yearly increase for home prices in 2022 compared to 2021 and a continued increase of 3.1% for 2023. For the past two years we’ve been in a very hot sellers market, and now the market has transitioned to a moderate sellers market.
Contact Us Today
Regardless of whether you are on the sellers side or the buyers side, the best way to enter this ever-changing housing market is to work with an experienced and knowledgeable real estate agent. Working with an agent is the only way to guarantee a successful sale for both parties and find a home that suits your needs as well as your budget. While the market continues to shift to favor one side or another, it’s important that you work with an agent that can represent the home in the best possible light and reach the most favorable outcome. Connect with The Bateman Group today!