The Impact of Rising Interest Rates

Today we’ll talk about increasing interest rates and how they affect both buyers and sellers. Everyone looks at interest rates and talks about how much they will affect the buyer, but in reality, rates affect both buyers and sellers.

For every 1/4 point the rate goes up, buyers afford $25K less of a sales price than they did prior to the rate increase.  From a seller’s perspective, this means that your pool of potential buyers shrinks. As rates rise, fewer buyers can afford the property you are selling. Buyers searching in higher price ranges might be forced to look at your house too, but they might not be interested.

As a buyer, the home price you can afford goes down as rates rise. An example is let’s say you were approved to buy a home when the rates were 3%, and the price you were approved for at a 3% rate was $500K.  If the rate you’re quoted today is 5%, your $500K price you had been approved for at 3% now becomes $300K, which in the Austin area can likely price a buyer out of the market. 

We have to keep an eye on these interest rates all year because they affect both parties in a transaction. If you have any questions about this topic or any other real estate subject, please contact us.

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