After all these years of us bestowing the blessings of unusually low interest rates and all of us enjoying their consequential benefits, we are now beginning a new phase. So many things are now contributing to the changes that the inevitable has occurred, rates creeping up. They are still very good, but not the once in a lifetime that we recently enjoyed. So, we move on. What are the consequences? Maybe they aren’t as bad as one might initially speculate with this not-so-surprising surprise. Think about it. Higher rates mean higher payments. Does that mean lower prices? In normal circumstances one would say yes, but these aren’t normal times. Home prices are holding steady at their high level. In addition to the premium real estate prices, rents are also very high. Think about that. If rents are so high, why wouldn’t someone pay a little higher interest payment to have the comfort of ownership stability? Rents have spiraled upward faster than home prices these days and are often at, or higher, than what a house payment would be. If the increased interest rates bump one’s payment a bit, it is very likely that the home purchased at a premium price still offers a better opportunity over the next 15-30 years than does paying a premium rent, and always being subject to changes in rent or notice to vacate. Some new loan opportunities have already opened up. In just a couple of days, we have learned of new loan opportunities that were unthinkable in recent years. They are not risky to the borrower, and they open doors that were previously locked shut. The unthinkable is doable. Most of these changes involve lenders holding the loan in their portfolio, not selling them on the secondary market. They include loans on manufactured homes built prior to 1976, good land money, second home money, construction loans, etc. There is even a special for medical personnel that is $0 down, 100%LTV and no mortgage insurance. We believe that the lenders have been anticipating this change of interest rates and have been creating new loan programs to offset the rate change. This is good for the loan consumer and for sellers. Both will win from this creativity. Call your real estate agent and ask what you can get done in this market with your financial circumstances. You might be surprised by a new loan program, a home price drop, a new home on the market that works for you, etc. You have more variables to consider to achieve your objective. Work them. Housing demand is still outstripping the supply. The supply challenge will cause new home construction, which will remain high due to the incredibly high cost of materials. Don’t look for prices to go too low too fast. Most homeowners today have equity and reasonably priced loans, or they own their home free and clear. We aren’t faced with the house of cards real estate economy of the 2008 era that led to the major collapse. We might eat less steak in these inflationary times, but the residential market should show resilience as we work through yet another financial market swing. Don’t get hung up on the principle of the rate increase. If you want to lament the loss of the opportunity to get a lower rate loan, spend some time contemplating your loss of buying when home prices were lower and then get into gear and make a decision for the times. Some house prices may come down, or not. As always, trying to time the market is like catching a falling knife. Get yourself situated for these adjusted times and move forward. Make a plan and work your plan. Real estate is not a short-term investment, put on your long-term glasses and adjust the tint… rose preferred. Consider the joy you’ll experience everyday living in your ideal home. Then consider the price of that joy and ask yourself what you are willing to pay for that. Will one or two percent increase in interest keep you from your goal? When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. dpwtigers@hotmail.com.
