We’ve all watched it over the last four years as the cost to borrow money has been on the rise. According to TheMortgageReports.com here are the average interest rates over the last 4 years.
2020- 3.10%
2021- 2.96%
2022- 5.34%
2023- 6.87%
Now in 2024 we are still in the high 6’s.
So onto the question, “HOW CAN I WIN AS A BUYER IN A MARKET WITH HIGH INTEREST RATES?!”
THE PLAYING FIELD IS LEVEL FOR ALL BORROWERS – One thing I often ask people who are shopping in this market for a home is “Did you get a pay raise when interest rates went up?” The answer 99% of buyers will give is “no, and why are you asking that question?!” I ask it to them to say… “that’s okay you didn’t get a raise when rates went up, and no one else did either!” As a buyer you’re still working with the same amount of money you would have had per month if rates would have been in the 3’s or 4’s. This rate hike doesn’t just affect you, it affects every single borrower who is in the market for a house. You are competing versus people for a house that are in your same situation, so don’t get discouraged. Your competition is working with the same amount per month to pay for a mortgage that you are working with. They don’t have a secret lender that is offering a 4% rate while you’re working with one in the 7%’s.
“WE THINK RATES ARE ABOUT TO CHANGE, SO WE WILL WAIT” –
Dave Ramsey said it best when he said “When interest rates are up, buy the house, if rates come back down…refinance” If rates change and you just bought a house, you’re in a WIN – WIN situation. If rates go up, you’ll be glad you locked in when you did. If rates go down you can refinance and lock in that rate. One thing I am seeing savvy buyers do in today’s market is ask their loan officer ahead of time if they could offer a free refinance at some point over the next few years should rates drop. Most lenders have seen a drop in their number of loans funded as rates have increased, so I’m seeing lenders who will offer this to buyers upfront.
CASH IS KING –
At the risk of sounding like your grandpa too much, Cash is truly KING! You know who isn’t negatively effected at all by interest rate hikes, people buying in cash. Actually people holding onto cash have made money through the hikes according to NerdWallet, “with increasing rates, loans are generally more costly, but savings accounts can earn higher yields. For those who have little or no debt and can contribute to savings, a Fed rate increase could be a financial opportunity.”
Now I think it’s pretty obvious that having an extra 50k or 100k in your bank account when buying a home would be beneficial to everyone, but it doesn’t take as much as you would think to start to see your monthly payment start to drop. To those of you who locked in a 3% interest rate in 2020, start taking the money you are saving per month by locking in such a low rate and after a year or two you’ll have a chunk of change there ready to help you purchase in whatever market you want to purchase in!
YOU’RE NOT IN THIS ALONE –
You know what’s scary, feeling alone in the home buying process. Making the largest purchase of your life without the confidence that it’s the right house for the right amount at the right time… that’s scary.
Having the right people in your corner when it comes to who will help you buy and sell is crucial. So how do you find the right professionals to help you through the process? I’ll start by telling you what not to do. The amount of people I have run across who have said “I used my nephew who is a realtor and it was horrible, but I felt like I had to use him because he’s family.” Most of the time, the equity in ones home is the largest asset that gets left to the family when one passes away. The wisest thing you can do for your family is to make the best decisions when it comes to hiring a professional to buy and sell your home.
Here are the questions I recommend asking when you’re looking for a Realtor.
- How many homes did you help clients buy or sell last year? (If this number is under 10 it might mean they are working part time or not as successful as you would want)
- Do you mind if I speak to some of your past clients? (This is obvious but getting to ask past clients the type of experience they had can really help you know how the agent will be to work with)
- Are you available to show homes on nights and weekend? (Real Estate doesn’t sleep, an agent who says they will show you houses between 9-5 on Monday – Friday is an agent who isn’t going to get many offers accepted in todays real estate market)
- How will we communicate? Texting/ Calling/ Email etc. (Picking an agent that communicates in the way you want to communicate is extremely important)
- What do you do to go above and beyond for buyers rather that just sending me houses as they hit the market? (This might be the most important question, in 2024 anyone with a smart phone has more info on a house that just listed than the listing agent on a house in 2010. A 2024 realtor MUST provide more than just a link to a new home that listed.)
- How many houses did you find off / pre- market for your clients last year? (The elusive off-market / pre- market sale, they happen they are just rare. Find an agent that will be on the lookout and is daily in the real estate community and your chances for something like this skyrocket)
The moral of the story when it comes to buying a home in a market that has high rates is this.
- The playing field is level for all borrowers
- You can be in a “win-win” situation no matter if rates go up or down
- Save cash while you can
- This is not a market you want to buy in WITHOUT an agent who knows what they are doing
Thanks for Reading,
Reach out with any questions!
– Sam Stone
Who is Sam Stone?
Sam Stone is a passionate real estate professional in Louisville, Kentucky. Over the past 3 years, Stone has sold over $20 Million in residential real estate and has consistently ranked in the “Top 100” in sales volume in a highly competitive market where there are over 7,000 Louisville Realtors. In 2023, Stone was named a “Rising Star” in Louisville by Real Producers Magazine.
Sam’s passion is helping buyers, sellers, and investors through the complex and intimidating real estate process. His custom, customer-centric approach ensures that each client’s needs are at the forefront of decision-making, and his tireless work ethic and marketing skills have earned him a good reputation in the area.
Aside from being an agent, Sam is also a husband and father of two. During his free time, Sam enjoys fishing, golfing and watching Survivor. Sam is always staying on top of the latest real estate trends, technologies and market insights. His goal is to help each and every client achieve their real estate goals, no matter how big or small.