Everyone knows that interest rates have been creeping higher. The question is whether you need to change your home buying plans because of it. There are a variety of factors to consider when you’re looking at the Davie real estate market, as you will see below.
1. Small Interest Rate Increases Aren’t Devastating
All of the coverage in the media about interest rate increases – whether they have increased, or might increase, or will increase – can tend to make you feel as if buying at a higher interest rate will break your budget. You need to do some math to determine what the impact of increased interest rates will be.
Here’s an example. Let’s say you’re financing $200,000. Your monthly payment for the mortgage itself would increase by approximately $60 per month for every half-point increase.
At 4.5 percent, you’d pay around $60 per month more than at 4 percent. At 5 percent, you’d be paying $60 more per month than at 4.5 percent. If a difference of $60 per month makes it impossible for you to purchase, you’re probably overextending yourself in the first place.
Also, keep in mind that interest rates don’t typically increase in half-point increments. For example, in December, mortgage interest rates went from 4.13 percent to 4.16 percent during one change. In addition, rates have stayed under 5 percent for the past 10 years. We have a long way to go before we get close to an average rate.
2. Market Appreciation May Slow
The possibility also exists that homes will appreciate at a slower pace than we saw last year. While we’re currently in a seller’s market, the supply of homes on the market is low, and rising interest rates will scare some buyers out of the market.
3. There Are Ways to Win in a Seller’s Market
Buying in a seller’s market has a strategy all its own. It isn’t necessarily more difficult to buy, but you need to use the right strategy. In a seller’s market, sellers can be more particular about the buyers they deal with. Sellers want buyers who can prove their ability to close a deal. Sellers can also be less likely to negotiate on price because buyers are plentiful.
If you’re buying in a seller’s market, make yourself a prime catch for any seller.
- Get pre-approved. We counsel all homebuyers who will be financing to obtain a pre-approval before starting to shop for homes. A pre-approval clearly identifies a target price range for your search. It also carries weight when sellers review offers and during negotiations. In a seller’s market, it becomes even more important.
- Plan to be decisive. In a seller’s market, you’ll need to make quick decisions because there may be other buyers right behind you. That doesn’t mean you should be impulsive. Make sure you get a good overview of the market from a qualified Davie REALTOR®. That way, when you’re ready to buy, you’ll know when a home is the one for you.
- Plan to make your best offer. If you’re looking at a home that is being offered at market price, make your best offer. You may not have time to negotiate if other buyers are making offers at the same time.
It doesn’t matter if you’re a first-time Davie real estate buyer or looking to buy a Davie luxury home, you’ll get the best outcome if you work with a top Davie REALTOR®. The agents on Teri’s real estate team are local real estate experts and can help you navigate the ins and outs of the Davie real estate market. Call us at 954-242-8030 or contact us online.