Interest rates are on the rise, which means mortgages are costing homebuyers and homeowners more. No one enjoys paying more for borrowing, but what does this mean for anyone who wants or needs to sell their home in the near future?
Do rising rates mean you should sell your home now, wait until they settle, or even until they drop?
Unlike other areas of the world that are currently (November 2022) experiencing more significant economic turmoil, the US economy is generally in a good place. While the UK is (according to the Bank of England) set to face its worst recession since the 1930s, and much of Europe isn’t fairing much better, the US dollar remains strong. We’ve got job growth and our unemployment rate is dropping.
However, it’s not all good news. Energy prices are going up here as much as they are in other countries, there is a growing risk of recession, and the increase in interest rate is trying to tackle inflation.
This means that while more people are employed and salaries are generally increasing, that extra money is only maintaining someone’s quality of life, rather than improving it. The increases in the cost of living and cost of borrowing are eating up that money that could have been disposable cash.
The Federal Reserve sources suggest the interest rate will continue to rise in small increments at least through the beginning of 2023 so making the right decision could be crucial.
It’s important to remember that any form of economic forecasting is guesswork, even for those who are extremely knowledgeable. While interest rates are on the rise, they steadily fell from the early 1980s when interest rates hit a high of 15.8%, and have been going up since 2020, when they hit a low, largely due to the pandemic.
This means housebuyers have been able to borrow affordably since the early 2010s (though arguments can certainly be made for these lows artificially raising house prices beyond what’s realistically affordable at higher rates), and aren’t accustomed to higher interest rates.
What this means for sellers will likely depend on the type of buyer their home attracts, and if it’s in an area that continues to attract potential buyers. Remember that there are always winners and losers in a recession – just because your home attracts first-time buyers and young families doesn’t mean there won’t be any potential buyers.
Perhaps the most important thing is don’t panic. Selling your house is a huge step and the effects are not just financial. Remember that interest rates move gradually, a quarter of a percent or so each time. So take a breath, don’t rush, and consider all the factors. Ask yourself:
- Why do I want to move?
- What is the likely direction of interest rates in the next 6 months?
- Is the housing market in my area robust?
Unless you are being forced into a move you should realize a month or two will make little difference. Getting the decision right is more important than timing.
If you’re looking to sell soon (in the next 3-6 months), try not to worry too much about the rising interest rates. This is still a good time for buyers to fix their mortgage at a lower rate. Provided we don’t see an influx of houses coming onto the market from people who bought a home while the market was hot between 2020 and mid-2022 and now cannot afford them, the only real difference you’re likely to see is there will be fewer bidding wars for properties, and properties that aren’t recently renovated may take a little longer to sell.
While the housing market does seem to be cooling, most realtors would say that it is still a good time to put your home on the market. People still want and need to move and the housing inventory continues to be relatively low – it is still possible to get top dollar for your current home. With interest rates expected to keep rising it could be the smart decision to sell your house now before buyers get scared and the potential pool drops.
Generally, spring and summer are thought of as the best times to sell a house but while winter may not be the best season, it might be better than waiting and finding that more interest hikes deflate the market. If you are forced to move by a change in employment or other pressing reason, you may have no choice – the right time to sell your home is when you need to sell.
Interest rates rise and interest rates fall but the world keeps turning. If you are not being forced to move and are just looking to make the biggest profit on your home it may be better to wait until rates fall again – though that might be a long wait.
If you need to move as soon as possible and aren’t convinced your house will sell on the cooling market, consider selling to a cash buyer. Investors are always looking for homes to buy to renovate and sell on or rent out, even in times of recession.
If you do need to sell quickly but think your home needs a lot of work and repairs and you simply don’t have the time and resources to do this yourself, reach out to Pavel Buys Houses. We will buy houses in Massachusetts for cash, whatever their condition, and can close in just a matter of weeks. To find out more about how to sell your home to us, click here.