It seems strange to talk about rising interest rates after being so low for so long, but here we are and we have to adjust. Many potential buyers stop looking for homes when mortgage interest rates start to rise. Real estate agents will tell you that they see fewer people at open houses during times when interest rates are higher.
This is understandable to some extent, as higher interest rates may prevent some buyers from qualifying for the amount of financing they will need to purchase the type of home they want. However, many other buyers are expected to continue to search and buy a home during periods of rising interest rates.
Remember that house prices generally move in the opposite direction of interest rates. When rates are low, many buyers are actively looking to purchase real estate. Higher rates generally discourage many buyers, resulting in too many homes being sought by too few buyers. This situation tends to pull prices down. So, one of the best ways to make a good real estate investment is to do the opposite of what most others do. If most people are buying, it’s probably time to sell. If most people aren’t buying, it’s probably time to make a purchase.
Suppose you buy a house in a market where interest rates are high. You will find many motivated sellers who need to sell their homes and move on with their lives. Their motivation and the lack of many competing buyers will encourage them to negotiate a better selling price than usual. As this is a high interest rate market, you will have to pay a rate that is not ideal. However, you can go back to your lender when rates drop and refinance the loan at a lower rate. This is a better situation than paying top dollar for a house in a low interest market because you can never renegotiate the selling price.
TIPS: How can you know what type of real estate market exists at any given time? Only by talking to a professional who follows the market full time, your Realtor®. Through the use of multiple listings and computer systems, your real estate agent knows recent sales prices, current asking prices, and availability of homes in your price range. Estate agents are also aware of local interest rates. Buy your next home with the help of a real estate agent®.