Rising Rates Reduce Real Estate Opportunities

Dated: 11/19/2016

Views: 237

Our market has been roaring along with Sellers in control for over a year. Many Buyers have been frustrated by competition, beaten out by more aggressive Buyers, sometimes even rejected by Sellers confident that they'll realize their expectations. It sometimes takes a rejection or two before Buyers step up their game to get their foot in the door. Remember that a Seller's market obligates the Buyer to present a compelling argument for Seller engagement, usually in the form of price, but Buyers should never underestimate the power of a clean contract, strategic earnest money, and solid financial footing. My long-established, preferred lender's pre-approval letter, in conjunction with my sound counsel, can mean the difference between success and failure.

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What many Buyers often fail to understand is that while my preferred lender and I are working diligently to deliver success to our Buyers, it isn't occurring in a vacuum. We're working dynamically within ever-changing real estate and lending environments, which can have a tremendous impact on the likelihood of success. Most of the time, all of this happens in the background, which is intentional. After all, our jobs are to act on our Buyers behalf, observing their best interests, while reducing if not entirely eliminating the stress and strain of purchasing a home.

Everyone knows that the real estate market tends to slow down when the weather gets cold and wet, when the holiday decorations go up, and when kids enjoy mid-year school vacations. These are predictable, and repeat year after year. What isn't always apparent to the occasional Buyer is the impact that financial volatility plays in buying and selling real estate.

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Perhaps the best illustration is to imagine the value of currency. There was a time when I was a kid here in the Pacific NW, in which it wasn't uncommon to handle Canadian change mixed among US coins. The values were the same, or at least very similar. Then one day the Canadian dollar fell to the US dollar, and merchants everywhere scowled when presented with currency from the Great White North. Suddenly, my friends and I were surprised to find it necessary to reconcile the value of a candy bar against the diminished value of our fists full of Canadian change. We'd discovered the short straw of volatility. Our purchasing power had diminished before our eyes.

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What does this have to do with real estate? Interest rates have been bouncing along for many years in a rather tight band, as the Federal Reserve and Government sought to reduce volatility and increase predictability. For many years, Buyers and Sellers alike have enjoyed the effects of mortgage interest rate stability. Put simply, we no longer enjoy that stability. Mortgage interest rates are one of many factors that helps a mortgage lender determine the purchasing power of a Buyer. The lower the rate, the higher the purchasing power. The higher the rate, the lower the purchasing power. It really is that simple. Ready to see where you stand right now? Visit my preferred lender and click on the "Apply" tab. 

Let's put it all in perspective. If a Buyer was pre-approved for a mortgage last week, and decided to proceed with a purchase respective the maximum potential purchasing power, that pre-approved Buyer will not enjoy the same purchasing power this week. Couple that with the prospect that the market will heat up again when the holiday decorations get thrown back out into the garage and the kids reluctantly go back to school, and there's ample reason to bring your best game before opportunity is lost.

It's my job to lock up your next property; it's my preferred lender's job to lock up the best rate. You don't want to look back in five years, wondering why you didn't buy that cheap house when you could.

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