The recent increases in interest rates (and mortgage rates) finally appear to be having the intended beneficial effects on the Local housing market! Ironically, higher interest rates may be helping millennials and Gen Z purchase their first homes.
Over the past 2-3 years, all too many have experienced that purchasing their first home has been unattainable given the heavy competition from 20, 30, and even 40+ offers on the same house. Thankfully, for these buyers who have been locked out of the housing market because they have not been able to compete with large down payments, generous appraisal gap guarantees and cash offers, the local West Michigan housing market is FINALLY showing signs of changing. Our local housing market is becoming much more friendly toward buyers and the change seems to be strong, unpredicted and faster than anyone would have thought.
In the past week, we have had some of our customers in the $200,000 to $400,000 price range get offers accepted on desirable homes in high demand areas that most would think would have been bid way up in the recent months and recent years. These offers in the past week included:
- $3,900 below list price, no other offers were made.
- At asking price, no other offers were made.
- 4,100 above list price, only 2 other offers were made.
- $10,600 above asking price, only 6 other offers were made.
Not one of these offers had to offer an appraisal gap guarantee of any type, and 1 was successful with a government loan backed financing. The data above is based on verbal information given to me and represents only a drop in the bucket of a larger sample being the entire West Michigan real estate market. However, as a Loan Officer who was receiving purchase agreements with $30K, $40K, $50K+ appraisal gap guarantees that were necessary to beat out dozens of other offers just a year ago, I can’t help but believe this small sample size has to be more than just a coincidence.
While we will continue to see homes listed at asking prices that will generate a large number of offers, including still some with appraisal gap guarantees, finding the right home and how to best structure your offer should be left to the combined teamwork of the Buyer, the Realtor, and the Lender (Teamwork = Buyer + Realtor + Lender). If you are a first time homebuyer and you have been locked out of the market in recent seasons, or even recent years, now is your time to shine. Yes, you will be paying a higher interest rate than you would have had you purchased in 2020 or 2021, but today’s interest rates in the 5%’s are still lower than then average mortgage rate over the past 50 years.
By locking in an interest rate in the 5%’s, you’ll eliminate annual rent increases and be on your way to building equity and have the freedom of use of the property as an owner. The rate increases we have seen over the past few months or so have been painful, but necessary. Furthermore, paying on a mortgage with a rate in the 5%’s is much better than not having the chance to pay on a mortgage at all; as with rates in the 2%’s, it seems everyone is in the market. Paying on a mortgage with a rate in the 5%’s is also much better than paying on a mortgage with a rate in the 10%’s.
If you, or anyone you know is an active first time homebuyer or will be this year, please have them contact me for an analysis of programs, monthly payments, costs, and pre-approval. Together, Naomi and I have over 60 years combined experience working with first time homebuyers and we are known to provide the most attention to detail and best communication in the marketplace. We also assist in the financing of family sales from parents or grandparents to children, and work with the Michigan State Housing Development Authority (MSHDA) in providing first time homebuyer programs, such as tax credits, below market interest rates and Down Payment Assistance.