The decision to sell your home can be both exciting and nerve-wracking. Many homeowners, however, find themselves hesitant to take the leap due to two significant concerns. Firstly, they may feel locked into their current mortgage rates, which have increased in recent times. Secondly, the fear of not finding a suitable property to buy in the current low supply market holds them back. In this blog post, we'll delve into these challenges and provide helpful advice on how to overcome them.
Challenge #1: Now Having a Higher Mortgage Rate
One of the primary factors holding homeowners back from selling is the apprehension of facing higher mortgage rates. The average interest rate for existing homeowners is still relatively low, but today's typical 30-year fixed mortgage rates offered to buyers have risen significantly, reaching around 7%. This situation creates a phenomenon known as the mortgage rate lock-in effect, where homeowners prefer to stay put rather than move to a home with a higher borrowing cost. As you can see from the graph below, over 80% of mortgages are under 5%.
The Advice: Waiting May Not Pay Off While there are projections that mortgage rates may gradually fall in the future, trying to time the market perfectly can be a risky endeavor. It's challenging to predict the direction of mortgage rates accurately. Moreover, the current real estate market shows rising home prices, making it more prudent to act sooner rather than later. By selling your home now, you can avoid potential price increases and take advantage of current market conditions. Additionally, if mortgage rates do fall later on, you always have the option to refinance your new home if the circumstances are right.
I tell my clients there are 3 options: 1. stay put and do nothing. 2. Buy now at a higher rate with less buyers to compete with, refinance later when rates drop. 3. Wait till rates drop, but then you are in a race with everyone else who waited and this could create bidding wars, driving up prices on homes. Pick your option.
Challenge #2: What If We Don't Find Something To Buy
The low supply of homes on the market is another major concern for homeowners contemplating a sale. In Orange County we our normal (pre- COVID ) average is 6000 homes on the market. As of Today (Aug 3, 2023) we are at 2436 homes active on the MLS. The limited inventory is a result of many homeowners being reluctant to move due to higher mortgage rates, creating a cycle of reduced housing options. While having less competition can make your home stand out to buyers, it may also make you apprehensive about selling if you fear you won't find a suitable property to purchase.
The Advice: Broaden Your Search To address this challenge, it's essential to consider all your options and broaden your search. Don't limit yourself to a specific type of housing or location. Explore condos, townhouses, newly built homes, and even different neighborhoods or areas you haven't previously considered. New Builds are exploding in OC- which will help create more inventory.
With the flexibility of remote or hybrid work arrangements, you may have the freedom to expand your search radius, opening up more affordable and appealing options. An experienced real estate professional like myself can help you navigate various neighborhoods and find the best match for your needs.
Bottom Line
Overcoming the challenges of higher mortgage rates and limited inventory requires a proactive approach and a focus on what you can control. Rather than letting fear dictate your decision-making, seek advice from a knowledgeable real estate agent who can guide you through the process. By acting now, you can potentially avoid higher home prices and secure a home that suits your needs and preferences. Remember, the key to a successful sale and purchase lies in working with professionals who understand the market dynamics and can help you navigate these obstacles.
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