Have you bought or refinanced your home in the past couple of years? There’s a good chance you took advantage of the once-in-a-lifetime rock bottom low interest rates, and now you have a mortgage at less than 3% interest.
If so, congratulations to you, though I’m sure you’ve bragged about your interest rate to everyone and their mama by now 😆 .
Well, interest rates have now shot up quicker than anyone anticipated and are currently hovering between 6-7%. This has priced out many homebuyers.
First time buyers may no longer be qualified to buy the house they wanted and move-up buyers (existing homeowners upgrading to a bigger house) don’t want to lose their interest rate so they’re staying put. It’s called rate lock.
As a result, as you can see from the graph above (source Realtor.com), inventory is at an all time low. These are national statistics but keep in mind that real estate is local.
In some markets, although demand has fallen due to higher interest rates, supply has fallen as well so homes are still selling quickly, in some cases, there are still multiple offer situations.
Basic supply and demand. All those headlines talking about a housing crash fail to take into account this basic economic principal.
That said, there are indeed some local markets, where the housing supply has risen back to prepandemic levels. This article would be far too long if we dove into every single local market. We suggest you either contact a good realtor or research some of the data yourself on a site like Redfin.
What Home Sellers are Doing
If you’re a home seller with a decent property in a decent neighborhood, you’re sitting pretty. Again, you don’t have to have some amazing property. If there’s barely any water to drink, people will settle for tap water.
If you can’t move for personal reasons, or can’t afford to buy a bigger home, or just don’t want to give up your interest rate, we get it. Don’t move.
But many home sellers have been reaching out to us over the past year or so seeking a realtor to sell their home, and opting to rent upon closing.
They experienced record level increases in equity, saw a market with limited supply and decided to take advantage. However, they also know that interest rates are pretty high so they will wait until they hopefully come down later this year or next, then buy.
They essentially have an investor’s mindset. Their selling their investment when it’s high and will cash out, in some cases, well over 100K – in less than 2 years!
They will then wait until there’s more supply in their local market, regardless of how long it takes, before they buy back in.
If you have the flexibility to do this, take advantage before rates drop again and there’s another feeding frenzy.