How Do High Interest Rates Affect Home Sellers in Santa Cruz County?
Interest rates are on the rise both nationally and here in Santa Cruz County. While they’re still historically low overall, they’re definitely higher than they were a year ago, which can be less than optimal for buyers. Remember, a 1% rise in interest rates equates to almost an 11% difference in purchasing power. That's a lot in our local market of million-dollar homes. Many of the buyers we’re seeing in the market today are all too cognizant of this shift.
The good news is that many of today’s buyers still have the same access to the upfront money for down payments and closing costs as buyers from the past couple of years. The problem is buyers today are realizing that their money won’t go as far due to rising interest rates.
This is one of the reasons why we are seeing demand start to shift. For example, if your house was listed on the market for the same amount today and this time last year, today’s buyer would end up paying more for the exact same house at the exact same price due to the higher interest rates. Right now, it's those long-term financials that are the current issue for buyers.
Sellers may want to ask themselves what they can do to reduce the long-term effects of high interest rates for their buyers so they can attract the best buyers and get their homes sold quickly. As a result of the rising interest rates, some buyers can’t afford as much of a home because their monthly payments will be higher just due to interest. TWO BIG THINGS YOU CAN DO AS A SELLER:
Check to see if your current loan is assumable. This is especially relevant if you bought your house 8-9 years ago. It is possible buyers could take over your existing mortgage which is likely at a much lower interest rate than what they would be getting with a new loan.
Offer credit back towards closings costs so your buyers can buy down their interest rate and offer a higher purchase price.
As a seller you'll also want to watch out for places where financing may fall through. Because interest rates are rising quickly, you may be in a situation where your buyer was pre-approved at a certain rate when making the offer, but interest rates rose in the interim, and now they can’t get approved for the same mortgage amount. This is an uncomfortable situation to be in for both the buyer and the seller, so make sure your agent talks to your prospective buyer's lender to make sure they are still approved at current rates.
We are here to guide you through every step of this process and market your home so you can attract the best buyers and sell your property for top dollar–even in a time of rising interest rates. If you want help getting your home sold quickly and for the best ROI, give us a ring at 831.419.5852.