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Three What If Scenarios
Keeping in mind that our local and national economies are improving, inflation is real and mortgage interest rates, are rising, We can evaluate the financial risks by asking ourselves which of these three scenarios is most likely:
Home Prices stabilize and mortgage rates rise. Using the example in the picture above, if mortgage rates rise to 6%, waiting may cost our buyer clients the extra expense of $175.86 more per month. If the value of the properties they’re interested in don’t drop more than 13% in value before mortgage rates inflate from current rates to 6%, the decision to wait would create a financial compound fracture. Waiting would mean they've lost on two fronts, Value & Price and Cost & Expense.
Home Prices drop more than 13% and mortgage rates rise to 6%.
Home Prices drop and mortgage rates stay the same or fall too.
If you believe that home values in your market will fall faster and further than mortgage rates will rise (2. or 3. above), then advising your buyer clients to stay put is the way to go. Keep your eye on the market and when you see a favorable entry point, advise them to make their move.
If you think prices won’t drop more than 13% before mortgage rates rise to 6%, then your logical left brain will tell you it's wise to advise your buyer clients,
“Because home values are less likely to fall more than interest rates will rise, now is a safe time to make move you've been waiting and wanting to make."
Do your homework on property-value-trends for your micro markets, consider the implications of rising mortgage rates, Rise Up and advise with confidence.
Here’s what I think about my micro-market. . .
I think home values are stable and some neighborhoods will enjoy a rise in prices/values. Mortgage rates have risen about 1% in the last four months and will continue to creep up.
When my clients who would like to move, ask me if it's a safe time to move, I would discuss Price & Value and Cost & Expense factors with them. Afterwards, we'd be out the door dream home shopping. Pronto.
What do you think?
What's happening in your market? What are you advising?