Why Interest Rates Are So Important to Florida Home Buyers and Sellers
It almost goes without saying that interest rates are important to home buyers. Home sellers don't often think about rates, but they should. With rates currently on the rise, we thought it would be important to discuss why interest rates are so important to Florida home buyers and sellers.
Rising Interest Rates and Buying Power
Buyers qualify for mortgages based on their income and debts. Total debts must be below a certain percentage of total income. When interest rates rise, the same priced home becomes more expensive to purchase. Thus, the price range that buyers can afford changes too. As we detailed in our blog post on how purchase price limits change with interest rates, a 0.5% increase in interest rate can reduce a buyer's purchasing power by $20,0000. Thus, a buyer's maximum purchase price could decrease from $400,000 to $380,000.
Buyer Demand and Home Selling Prices
As seen in the example above, buyers bump down to lower price ranges every time rates rise. This changes the demand for homes in the higher price ranges. Reduced demand means less competition for listings and lower selling prices. Eventually, home prices will fall as a result of interest rate increases.
Summary of Why Interest Rates Are So Important to Florida Home Buyers and Sellers
As a buyer, you naturally want the lowest interest rates possible, as that saves you money over time. As a seller, you want to get the most money possible for your home. When interest rates rise, buyers can afford less and sellers receive less, so it impacts everyone! This is why interest rates are so important to Florida home buyers and sellers.
We've been spoiled for the last several years with low rates and rising prices. The market is pretty hot right now! Experts have been predicting that this would change in 2018 and we're finally starting to see it. Many buyers are in a rush to buy before rates climb too much higher. Sellers should be motivated to sell as well, before changes in demand and price become noticeable. If you are looking to buy or sell a home in Florida, give our team a call! We look forward to assisting you!