Battling Interest Rates

    The talk of the real estate world has been the interest rates over the last year.  We saw a steep decline in home values that hit bottom around January, and despite interest rates continuing to climb, home values have as well.  With 7% interest rates we are looking at 9% price appreciation since January.  For folks on the fence, who were waiting for home prices to drop, if you are now waiting for interest rates to fall, what do you think will happen to home prices?  Here is a graph for the NWMLS recorded monthly median home price, and then zoomed into just this year

    We can see the big covid spike, giving back those gains thru the winter and interest rate increase and the slow climb back up this spring and summer.  Despite the fall in prices, interest rates have kept monthly home costs up, surpassing even what you would have spent buying at the peak.  So how do we battle these interest rates?  The same way we approach all real estate.  Taking action as often as you are able.  Here is a chart for Home Prices in Skagit County, interest rate estimate, monthly payment estimate, and then some speculation.  If we see another 9% increase next year, what interest rate would we need to match the monthly payments pre rate hike.

    As you can see we would need to be in the low 4%’s to get a payment similar to the peak in 2022.  Do you think if interest rates dropped 3% we would see the same level of home price growth as we have had during the climb to 7%?  I don't have a crystal ball but I would not want to bet on only a 9% appreciation if interest rates fell to 4%.  For the folks who got lucky(took action) at the beginning of the year, they got a deal on the home, similar monthly price and are positioned for big equity gains and future lower payments.  Folks who are waking up and making moves right now, suffering some short term pain and being set up for equity growth and lowering their payments in the event rates drop.  Folks who bought at 3%?  Well they overpaid, we know they did, they know they did, they are taking short term equity hits to have wins on lower interest rates and looking for the long term pay out.  Folks who are waiting for the dream land scenario, well they are losing on every front.  When you look at the lifetime home price graph above, the line is always moving up, the major “Crashes” like 2008 are barely noticeable when you look at the greater picture.

    The question you have to ask, “can I buy right now?”  You are losing 100% of your expense on rent, none of that money comes back.  If you own, what is not making the move costing you?  Not everyone can take action right now, this message is for those who can but are afraid or unsure. 

“All things are ready, if our minds be so!“ 

    With our minds set to what is possible, we can find opportunities in every situation.  When we have serious health concerns, we consult professionals.  When we have serious legal concerns, we consult professionals.  When we have financial concerns we consult the news, the internet, and a wide array of other not great sources of information.  Reach out to me or another real estate or financial professional.  Lets have a frank and honest conversation about your situation, your goals, and how we bridge the gap between.

“But, by the mass, our hearts are in the trim!”