Interest rates are above 5% for the first time in over 15 years and they won’t be coming down any time soon. While inventory remains low and many areas of the country are still seeing a surge in prices, it’s hard not to wonder if the buyer pool will shrink heading into the summer. But while it may seem like doom and gloom are lurking just around the corner, there are some key considerations to make when assessing the market’s direction.
One of the most important things to remember is that not all home buyers are created equal. Some are more sensitive to interest rate changes than others, and some have been waiting for rates to rise before they enter the market. Rising interest rates are likely to stave off the intense bidding wars that have become the hallmark of a scorching market. Many buyers are more than willing to pay higher rates if it means they don’t have to offer 12% over asking price and give up their first-born to get a house that may not even fit their needs.
What’s more, real estate agents who work with VA and FHA buyers will likely find it easier to get their offers accepted in a rising interest rate environment. That’s because these programs allow borrowers to finance a home with little or no money down, and sellers are often more willing to accept an offer from a buyer who isn’t putting any skin in the game.
So while higher interest rates may put a damper on the seller’s market we’ve been experiencing for the past few years, that may actually be great news for buyers that have been priced out of the market. For every conventional buyer that may stop looking due to the rise in rates, there’s likely to be more than one other that’s ready to get in the game once the bidding wars die down and pricing flattens out.
Housing demand remains at near historic highs in the united States.
At the same time, home builders are struggling to keep up with this demand due to a number of factors including a lack of skilled labor and rising material costs. Despite these challenges, home builders remain optimistic about the future of the housing market. In fact, according to a recent survey by the National Association of Home Builders, confidence among home builders is at its highest level in nearly a decade.
So, while interest rates are on the rise, it’s important to remember that there are still many factors working in favor of the housing market. For real estate agents, this means that now is the time to start positioning themselves for success in a changing market.