Why Rising Interest Rates Might Not Be So Bad

Buyers and sellers are starting to question what rising interest rates mean for them

With interest rates suddenly north of 5%, many buyers are feeling a pinch, while sellers are starting to wonder whether they missed a window to sell. So long as the Walla Walla Valley area remains desirable and attracts a steady influx of buyers, it will remain a sellers’ market. At 5%, rates are still remarkably low by historic standards.

As rates increase, it could actually be a good thing for prospective homebuyers. How?

— Some buyers will elect not to move forward with a home purchase or will be more selective, thereby decreasing competition.

— At 5%+, seller-carry contracts are more attractive. Private lenders or “friends and family“ lenders may be willing to carry a contract at those compelling rates of return.

— As interest rates reach a point where they are close to matching the returns on invested assets, some who might otherwise have paid cash for their home or investment purchase will opt to finance, reducing the (perceived) competitive advantage of cash offers.

First-time buyers may feel disheartened, feeling like their opportunity to buy a home has slipped away. If this is your situation, the smartest thing you can do is reach out to your lender and understand the impact on your buying power. Washington State has programs to help first-time buyers with their down payment, and this might be an option to close the gap.

Another consideration to keep in mind:

— With concerns in Eastern Europe and a volatile stock market, some economists are speculating about a small recession into the beginning of summer. This could be a good thing for pumping the brakes on buying competition and on rates increasing faster.

I have a Rolodex of fantastic local lenders and am happy to send you their contact information or make an introduction. As always, if you have questions about Washington or Oregon real estate, I’m licensed in both states and can meet a cup of coffee or a phone conversation to discuss your questions and concerns. It’s an honor to educate my clients and friends about what’s happening in our local real estate market. (509)540-5027 | jeff@jeffstrickler.com