by Carole Smith, Realtor, Vice President, Compass
If I had a dollar for every time someone has expressed concern regarding buying a home as interest rates are rising, I’d be richer than the billion-dollar lottery winner! I remind my clients that they must keep financial stressors in perspective, particularly in the real estate market.
I came across a social media post that clarified how a mind shift impacts the perception of something as concrete as numbers. The consumer’s logic tends to be linear:
Low interest rates = good High interest rates = bad
As with most things, it’s not so simple. Here’s a chart illustrating why an increasing interest rate alone is not the sole driver of purchasing power.
Six to 12 months ago, you’ll recall a majority of South Florida homes were being sold well above asking price in a multiple-bid scenario. Presently, the market has cooled from the almost-two-year fervor and has become less erratic. Although not a complete buyer’s market due to the low inventory, we are seeing more of a negotiation among buyers and sellers as well as price reductions and/or lower offers overall. This is the factor that should be taken into consideration if you are hesitant to buy.
Home buyers were outbid early in 2022 but are now reluctant to buy because of higher interest rates. It surprises me that they were willing to overbid and be swept up in the frenzy but are having a hard time processing the shift in dollar allocation. The bombardment of inflationary talk and the constant mention of a real estate bubble creates an echo chamber.
I’m not saying that there’s not a financial slowdown and rising costs, but I wholeheartedly believe real estate tends to help weather an economic downturn. More importantly, if you are buying a home — outside of a savvy investment — it is a safe haven and the backdrop to many memories. The purchase, therefore, is not a linear decision. There are many inputs and factors. This holiday season, quiet your mind from all the outside pressures — revisit the numbers above — and realize that a shift in perspective is truly a gift.
Carole Smith has consistently been among the top five Realtors in Coral Gables for over 25 years. As a Harvard-trained negotiator, it’s no wonder she secures top dollar for her sellers quicker than the market average. To discuss your next real estate move with her, email email@example.com or call 305.775.5330.