How can you still succeed and Buy a Home with these pesky HIGH Interest Rates?
So you found an article that promises to explain why you should buy a home in Northern Virginia when everyone else is running for the hills. It may be pretty scary to take the plunge, as so many other buyers seem to be pulling out of the market. But with a little education, understanding and persistence, your luck in finding that dream home may be just around the corner…and the anxiety could be out the door!
Since the recent federal interest rate hikes, it seems as if the real estate market has completely collapsed. Just last year at this time, home prices in the Northern Virginia area were at an all time high, interest rates were at an all time low, and that meant selling a home created lots of options for the seller, and lots of “risk” for the buyers.
In order to compete in that market, you were facing having to offer $100k or more over list price. Buyers would also have to waive their finance contingency, waive their appraisal, and just forget about asking for a home inspection. Hey, also give the buyers as much time legally allowed in FREE rent-back.
Buyers might be granted an opportunity of a 15 minute time slot to view the home, if they even had a chance to do that. Sellers in this market were removing the “Coming Soon” sign and replacing it with a “SOLD” sign, as many homes went under contract sight unseen before even hitting the active market.
Well, those crazy real estate days are over. And that means as a buyer, you may have some of your power back. But now, buyers are feeling the crunch of the mortgage rate hikes, and thanks to the Fed trying to slow inflation, they may have just put a damper on your home buying chance…OR HAVE THEY?
Why Did the Real Estate Market Slow Down? Should I still Buy a Home?
Well the short answer to “what happened to the real estate housing market”, is the interest rate. And the short answer to “can I buy a home” is YES, it’s actually a great time. But in order to fully understand everything, you need to take in consideration the past 3-4 years of the market boom. First off, the real estate market did not stop or did not crash at all. Closings are still happening at or around the same rate as before most people began noticing the slow down occur. What actually happened is, an entire pool of home buyers, at every level of the market, just simply became deflated, and gave up.
What do you mean “deflated”, you ask? Well it’s pretty simple. Home buyers were running around the Northern Virginia area with locked in interest rates at or around 2%. Their buying power was very impressive, and with such a low interest rate the average buyer in our market was looking at homes that were larger and in the desired areas they dreamed of living. Home prices sky rocketed due to the demand.
It was a great time to be a home buyer. Or was it??? Home buyers, in order to take advantage of this opportunity, had to trade a lot of “risk” for the potential of a great “reward”. Buyers risked not conducting a home inspection and basically agreed to purchase the home “as-is” with no idea what they were getting into. Some buyers got lucky, and some buyers ended up with homes that needed a lot of repairs. Virginia is a “Buyer Beware” state and if the buyer waives the risk of an inspection, the liability is all on the buyer.
But add to that, the sellers in this market wanted absolutely no contingencies. So your offer was not getting accepted without waiving your finance and appraisal contingency. That meant buyers had to also have cash to cover a low appraisal.
If you were trying to take advantage of a VA Veterans Loans or an FHA loan, your offer would most likely go below all the conventional offers because VA and FHA loans require some of those things conventional loans were able to waive. Greedy little sellers , aren’t they? Well, not really, those sellers needed the assurance that their home was sold, because they most likely had to do the same thing to the new home they were purchasing somewhere else. It was a domino effect that continued up the chain of real estate.
So where did all the Home Buyers Go?
Simply put, the majority of home buyers just gave up. Think about it. Buyers were making offers on $1.2 million dollar homes with 6000 square feet and all the beautiful finishes. But the interest rate hikes reduced their buying power to smaller single family homes now priced around $850k.
They went from “WOW” to “oh” really quick. Those looking at the $850k single family home price range, went to now only being able to afford a town home for $450k-$500k. They also went from “WOW” to “oh”. They simply realized the interest rates wenr up and the home prices did not go down as quickly. Buyers could no longer afford the home they were able to buy just 6 months earlier. The longer they waited, the worse it got.
So for a few months the market in our area got really really quiet. Crickets! Sellers that missed the boom and that would not reduce their selling price, watched their homes sit with no showings and no interest. For the first time in years, listings began to expire and go off the market. Sellers were scared to list their home and buyers were scared to make any moves. “Let’s just see what happens” became a very common saying for both sides.
Buy a Home With Elizabeth
Buying a home in Northern Virginia can be stressful no matter if this is your first time or your fifth time going through the process, and we understand that every situation is always different. That’s why picking the right Realtor or Real Estate Agent can not only save you on stress, but money too.
Elizabeth Ann Kline and each of her hand selected agents on the LIST WITH ELIZABETH® team are all licensed REALTORS, highly trained negotiators and have years of experience in every aspect of the home buying process. Elizabeth and all of our agents specialize in Northern Virginia, Fairfax County, Arlington County, and Alexandria City, but we also have agents on our team that specialize in the District of Columbia (Washington, DC), and Maryland as well. Call Elizabeth today and let’s get started!
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When considering to buy a home, having the right team working for you and representing your interests is the first start to a great experience. Make the first right decision for your Home Buying Experience and call Elizabeth at 703-829-5478 today or fill out the contact form below! Hurry!