There's something happening in the market right now that really will impact your sellers. And that is interest rates are starting to climb a little bit.
When interest rates climb, it affects sellers in two different key ways:
1. It affects what's called buying power of all the buyers in the marketplace.
Here's what that looks like when you're talking about buying power:
If you're a buyer who is going to get a loan of, let's say $300,000, and you had your average down payment that would equal a payment and interest charge of about $1,225 per month. Now that interest rates have come up about a half percent, what does that mean for you?
If you still want to have that same payment, roughly $1225 a month of principal and interest, your buying power actually goes down because interest rates have gone up. You can no longer afford the $300,000 mortgage. Now you can only afford $285,000.
This puts "pricing pressure" on the market.
Now we know we're in some supply-demand dynamics that are causing all properties to rise in value quickly. But over the course of an entire market, if we start to see interest rates climb even further, we're going to start to see some pricing pressure enter the marketplace.
That's why sellers should take manage of the supply-demand dynamics in the market right now.
2. Cost of home ownership
Another key thing that sellers never think about until they're already in escrow is this: Almost all sellers are going to become a buyer. And when they become a buyer they're going to now be paying a half percent more than they would have in January. That half percent will add up to tens of thousands of dollars and more costs for them now that they've waited a little bit of time.
If they wait longer and interest rates climb further because of the market volatility, they could actually add tens of thousand dollars more to their bottom line, over the course of their home ownership.
Two key reasons why a seller that's on the fence should come to market right now:
Overall buying power and cost of their next home ownership cycle.
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