Maui Real Estate Blog

Sellers and Interest Rates

If you are in the process of buying a home utilizing conventional financing (a mortgage), chances are you are not just focused on home prices. You are probably also carefully tracking interest rates, since they have a major impact on the overall affordability of the property which you are seeking to purchase. The National Association of Realtors created a Housing Affordability Index to help determine overall home affordability based on interest rates, prices and income. The NAR tracks this by region on a monthly basis.

As an informed home seller, you may want to be keeping an eye on interest rates and consider how your property fits into a prospective buyers “affordability index”. Although interest rates are still relatively close to their all time lows, they have shifted upward recently. Over the last month and a half, the increase in interest rates means buyers can expect monthly payments for a home to have increased by 10%. Buyers who are financing their purchase will be left with a number of different courses of action. They can tighten their belt and accept the increased payments. They can play a waiting game hoping that rates and or home prices will fall. Last but not least, Buyers can adjust their purchase budget downward to keep their monthly payments in check. Beyond the increase in interest rates, tighter lending standards (fallout from the sub prime loan crisis) have eliminated some buyers from the market altogether. What does this mean for you as a seller? In all likelihood the number of potential buyers for your property may be decreasing. Or the amount of money that a particular buyer is willing or able to pay for your property may decrease. Depending on your goals and or needs as a seller (time/money/redeploying capital etc), you should pay close attention to Interest rates and how they may impact the marketability of your home. If you need to sell quickly, you may want to consider making adjustments in the pricing of your home based on increases in interest rates.

Pete Jalbert

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