Rates Are Higher: How Does This Affect You?

Here’s what buyers and sellers need to know about higher interest rates.

Right now, it seems like there’s one thing on everyone’s minds: Interest rates. They’ve increased since the beginning of the year, and the impact on our housing market has been dramatic. That’s why we want to take a look at interest rates from 2021, see how they compare to rates today, and explain what this all means for buyers and sellers. 

First, interest rates were historically low in 2021. Most people could get a rate somewhere in the 2% range, but others got even lower than that. When you compare those rates to our current ones, it’s easy to get discouraged. Current rates are in the 6% range, so we understand why buyers are worried.

 "Now, you don’t have to offer above the list price—in fact, you might be able to pay a little bit below."

However, we think some news outlets are overreacting. Some people are treating these interest rates like we’ve never seen them before, which just isn’t true. The reality is that current rates are closer to the historical norm, while the rates from 2021 were an anomaly. 

Let’s look at an example to see how rates affect buyers. A $600,000 home in 2021 would cost about $169,000 over 10 years, while that same home purchased in 2022 would cost $327,000 over 10 years. That’s a huge difference. 

However, consider that our market was much more competitive last year. To win the home, you would likely have to offer way over the list price; we’ve seen people go as high as $100,000 extra for properties in this price range. Now, you don’t have to offer above the list price—in fact, you might be able to pay a little bit below. Considering this, the total amount you end up paying in both examples is nearly identical. 

If this didn’t convince you, you might think you can just wait until rates come back down. However, we caution against this; you might be waiting for a long time. Before 2021, the last time rates went down to 3% was in 1954. Barring another global pandemic, it seems unlikely that rates will get that low again soon. 

There are still plenty of opportunities for buyers and sellers in this market, including some that weren’t possible before. Call or email us with any questions. We look forward to hearing from you.

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