Water view off Palos Verdes coast

It is easy to understand how higher interest rates impact buyers; when rates move higher so does a buyer’s monthly mortgage payment.  The higher rate means a buyer may not qualify for the loan amount they could get at the lower rate, and may need to adjust their new  home criteria downward. Buyers need more income to qualify for the same loan, their dream home must be downsized and their payments will be higher.  Ouch.   

Sellers will feel the effect too.  When the same home costs a buyer more to purchase the trickle down result is they are less likely to pay full price, they will ask the seller to pick up more costs and most likely they will negotiate harder on repairs and credits.  Higher interest rates impact sellers too.

Rates could not stay this low forever, and they are still low from a historical viewpoint.  Checks and balances are always needed, and with the surge in number of home sales and increase in prices during the past year an interest rate hike was to be expected.   Buyers experience a direct blow to their purchasing power.  Sellers, after years of coping with buyers in control, enjoyed a fabulous comeback year.  Is the party over for sellers?  No, but I believe the market pendulum is back in balanced territory and that may be a refreshing place to spend some time after the unsustainable rising prices and multiple offer scenario of the past 12 months.

Breathe in, breathe out.  The market (and its participants) needs a moment to adjust.

– Norma (310) 493-8333