With home prices reaching market highs unseen since 2007 and interest rates creeping back up, it does implicate some changes depending on what side of the real estate table you are sitting on.
With interest rates ticking up it can mean buyers have less buying power. Thus far rates have only risen three quarters of a percent since the barging rates this spring; no need to panic just yet. Transversely it does reduce the amount some people can spend when purchasing a new home. Buyers looking to spend $300,000 for a home may only be able to spend $280,000 based on their new “buying power”. It does tend to have more of an effect on buyers purchasing in the lower price brackets, though three quarters of a percent on a million dollar loan can really add up! On the flip side with home prices reaching the highest levels since 2007, as outlined in July’s issue of Finance & Commerce, we are seeing an increase in homes going on the market or able to go on the market. This means more options in all price levels for buyers to choose from.
As just mentioned, with home values rising it pushes more home owners out from that illusive underwater mark, which in turn increases the likely hood of them listing their homes. With low inventory levels this can actually have a diverse effect on the market. With a flood of inventory it can swing us back into a buyer’s market from the more equal one we are seeing now. This could also cause a buyers feeding frenzy and swing the market to the seller’s side quickly. We will have to wait and see how this part plays out.
Bottom line, it’s a great time for all parties involved. We are still experiencing great interest rates for buyers and now with more homes to choose from. Sellers are able to breathe again as they become buoyant from that underwater swim they have been treading, with home prices back to levels seen in 2007. This gives sellers more flexibility to sell and the ability to demand better prices.