Up until about 20 years ago, rates generally remained about 7.5% and home buyers purchased homes at record rates to get their slice of the American Dream. But now that rates are in the mid-5% range, sales are slowing dramatically.
This is what we know to be true:
1. Rates have nearly doubled since the beginning of this year
2. Buyers have started to "hold off" on buying
3. Inventory is at historically low levels
4. Cash buyers once again reign supreme (for a time there, it was worth it for a seller to wait for a buyer with financing because they were willing to pay more than a cash buyer)
5. Since fewer people are buying, more people will need to rent causing greater competition in rental properties and causing rents to increase
6. People will be throwing away money in rent when they could be investing it in their primary residence and writing off their interest payments
7. Rates will continue to go up making today a better time to purchase than tomorrow (Plus, if rates did ever go down in the future, you have the opportunity to refinance at any time.)
What is a Buyer to do??
BE REALISTIC. Yes, 6 months ago you could afford the monthly payment of $1 million and now your realistic budget is $800,000. (Good news: that's potentially $40,000 less you have to come up with in down payment!) Unlike 6 months ago, there isn't the same amount of competition - meaning you won't be in a bidding war and could actually purchase a home for its listing price.
If you want to buy and aren't sure what to do, contact a lender and find out what you qualify for and what programs best meet your needs. Don't know any lenders? Contact us and we can put you in contact with our trusted lending partners.
Want more information? Contact us anytime at 949-444-1601.