Fannie Mae 1 Year Rate Graph
Rising interest rates are often cited as the greatest threat to homeownership, and to sellers’ profits. After all, if buyers can’t afford the home you are selling, you’ll have to lower your price to the point where they can.
Although lower prices, when they occur, may attract more buyers, with higher rates, they aren’t going to see lower monthly payments, unless prices do a nosedive, which isn’t likely.
The Opposite Effect
Somewhat surprisingly, with average mortgage rates rising from 3.11% at the end of the year, to 4.16% today, the market hasn’t slowed down. In fact, it seems to be accelerating.
Looking at the Sacramento Tri-County Area (Sacramento, Placer, and El Dorado), although the percentages shift month-to-month, overall 65% of sales had multiple offers in 2021. Since March 1 of this year, 77% have received multiple offers.
What gives? Is it the new normal? A temporary bump up? Time will tell.
For now, I think FOMO (fear of missing out) could be a driving force. I’ve personally received calls from several previously ‘on the fence’ buyers, or those who just weren’t in a hurry, who are now ready and anxious to buy.
I represented 3 such buyers this past weekend. All 3 lost out. The $680,000 house that my client offered $765,000 on was lost to a $770,000 cash offer. Another wanted a property that was listed at $840,000. He thought $850,000 would be fair. It went pending at $925,000. Another offered $1,180,000 cash on a house listed at $1,092,000 and was beat out by a buyer offer. $1.25mil.
Should these buyers have gone higher? Could they afford to? These are the questions they have to ask themselves, and for them to decide.
Average price per square foot for Tri-County Area through Feb 2022Prices were up about 20% last year, and so far this year, up another 2.7%.
Some Buyers Still Cautious
I have a young relative who started looking at the end of 2017, and each year has held back on purchasing for fear that prices would fall after they closed. That can happen, but meanwhile, prices have soared, and now, interest rates are increasing, giving them less buying power.
I understand wanting to be cautious, and it’s important not to just ‘jump in’ for fear of missing out, but if you are considering a purchase, weigh out your options and decide for yourself if it’s the right time.
Remember that it took 7 years from the 2005 peak to the 2012 bottom of the previous market downcycle, and rates were at one time at 6.9%.
4.16% is great by comparison.
There may indeed come a time where rates or other factors will slow the market, and prices may stabilize or even drop, but for right now, prices are up again, and the market shows no sign of slowing down.
Questions? Want more info?
Drop me a line.
Steve Heard is a Realtor with EXP of California, Inc., License #01368503, and owner of MyFolsom.com
Reach Steve at 916 718 9577 or firstname.lastname@example.org