Time to Get on with Your Life?

For many homeowners thinking about selling, two concerns are holding them back. The first is feeling locked in by their low mortgage rates. The other is worrying that they won’t be able to find something to buy as inventory remains tight.

We’re going to dive into each challenge and hopefully give you some helpful advice on how to overcome these obstacles.

Challenge #1: The Reluctance to Take on a Higher Mortgage Rate

According to the Federal Housing Finance Agency (FHFA), the average interest rate for current homeowners with mortgages is less than 4% (see graph below):

Today, the typical 30-year fixed mortgage rate offered to buyers is between 6-7%. As a result, many homeowners are opting to stay put instead of moving to another home with a higher borrowing cost.

This is happening even when the homeowner knows that selling makes personal and economic sense over the long term. The two bedroom, one bath ranch that is too small now for their family of five is only going to shrink more. Or, the four bedroom, three bath colonial that’s too big since the kids are gone will continue to get bigger as fewer and fewer rooms are used. (And thinking that one of your children will want the home later is usually wishful thinking.)

The Advice: Waiting May Not Pay Off

While experts project mortgage rates will gradually fall this year as inflation cools, that doesn’t necessarily mean you should wait to sell. Mortgage rates are notoriously hard to predict. And, right now home prices are on the rise. If you move now, you’ll at least beat rising home prices. If experts are right and rates fall, you can always refinance later.

Remember: the equity that you have in your current property can power your move. You can put more money down and quite possibly end up with a new mortgage payment that is the same — or even lower — than your current one.

Challenge #2: The Fear of Not Finding Something to Buy

When so many homeowners are reluctant to take on a higher rate, fewer homes are coming to the market keeping inventory low. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains: “Inventory will remain tight in the coming months and even for the next couple of years. Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years.”

Even though you know this limited housing supply helps your house stand out to eager buyers, it may also make you feel hesitant to sell because you don’t want to struggle to find something to purchase.

The Advice: Broaden Your Search

If fear that you won’t be able to find your next home is what’s holding you back, consider all your options. Looking at all housing types including condos, townhouses, and even newly built homes can help give you more to choose from.

Plus, if you’re able to work fully remote or hybrid, you may be able to consider areas you hadn’t previously searched. If you can look further from your place of work, you may have more affordable options.

The concern among buyers about where they are going to go is a relatively new phenomenon. Before the pandemic — when houses could be on the market for six months or more — buyers never knew exactly where they were headed. They might have had some ideas about a certain school district, for example, but very rarely was the new home locked in.

Bottom Line

Instead of focusing on the challenges, identify what your needs are and how you can best address them. As we no doubt have mentioned too many times, we moved a little more than a year ago. We lived all the frustrations and concerns you will experiences as sellers and buyers. (Believe us. We got no special considerations from our colleagues/competitors, because we were realtors.)

Need to talk things through? We’d be happy to listen. Let’s connect at 508-360-5664 or [email protected].

Mari and Hank