For Sale: Metro housing market still hot even with higher interest rates
The inventory of homes priced to sell at $300,000 or less in the metro area remains tight.
“Under $300,000, there’s not a lot of inventory,” said Bethany Culley, a Realtor with Keller Williams Realty.
The inventory of houses priced for more than $300,000 in the metro area is low, too. “I don’t know if that’s going to change,” she said.
Multiple offers on residences have slowed compared to what they were a year ago, said Culley, a Realtor for more than 30 years.
“Last summer, I had one house that had 12 offers,” she said. “It was crazy because the offer that got it went $16,000 over the list price, no repairs, no closing costs, nothing like that. The seller was thrilled. The seller was a younger couple that bumped up to their forever home.”
The Federal Reserve’s decision on June 15 to up its key benchmark rate by the highest amount in 28 years was big news that is expected to affect buyers.
“These rising mortgage rates hurt affordability and decrease the purchasing power of many buyers,” Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors, wrote on the association’s blog. “In addition to increasing the amount buyers will pay to borrow for their mortgage, higher interest rates lower their purchasing power since a larger portion of their monthly payment will be put toward interest.”
Some buyers are expected to readjust their home-shopping budgets, as the impact of higher rates translates to a 25 percent drop in house hunters’ purchasing power since the beginning of the year. For example, a typical buyer could afford a $360,000 home with a $1,400 monthly mortgage payment at the beginning of the year. Now, with near-6 percent mortgage rates, a $1,400 monthly payment translates to a $270,000 house.
Buyers are aware that interest rates are rising, but they’re still low compared to what they have been historically, said Ben N. Walker IV, senior loan officer at Bank of England.
“Everybody is freaking out over interest rates but if you look at it historically 6 percent is not bad,” he said. “My parents got their first mortgage at around 15 percent in the 1980s.
“At the end of the day, paying a 6 percent interest rate is better than paying rent. You’re putting your own money into equity. If you rent, you’re throwing every penny away.”
Walker recommends that buyers be smart and live within their means when it comes to buying a house. He also recommends that buyers work with a mortgage person who offers good customer service and is knowledgeable about numerous mortgage programs.
Culley, who said she sells houses throughout the metro area, said the market remains strong especially in Ridgeland, Madison and Gluckstadt. “Lake Caroline is really strong,” she said.
Harriet Brewer, a Realtor with Nell Wyatt Real Estate, said the northeast Jackson residential market may be cooling off from what it was last year but it’s still strong.
“People are putting their homes on the market and getting offers that day or the next day,” she said. “I’m talking about homes priced at $200,00 and up.
“Northeast Jackson is a strong market. You can get so much for your money. You can get a fabulous house in Jackson for half of what you would pay in Ridgeland or Madison, even though the sellers are asking a pretty good price.”
Some buyers let metro area schools determine where they live, Brewer said, recalling how she worked with a family that moved to Madison County to the Reunion subdivision and is now moving back to Jackson because they want to be near Jackson Academy where their children attend school.
Brewer said buyers are aware that interest rates are rising, but “that doesn’t seem to be bothering everybody that much.”
Buyers who insist on a particular neighborhood may still find that low inventory limits their choices. For example, the gated development of Eastbrooke is a hot market, Brewer said.
Buyers who find a house they like should put in an offer as quickly as possible and keep in mind that a seller may not pay any closing costs or provide a home warranty, Culley said.
“In a buyer’s market, you would ask for all of that stuff,” she said. “I still think it’s important for a buyer to get a home inspection for informational purposes, even if the buyer is not asking for the seller to make repairs.”
Since the coronavirus pandemic, many buyers are seeking houses with amenities such as swimming pools and outdoor living areas, Culley said.
“It used to be that one out of 10 buyers wanted a pool,” she said. “Now it’s three or four who want a pool. A lot of people have changed their minds about pools. Outdoor living is huge.”
To secure the best price, a house still needs to look good, be clean, free of clutter, have had repairs made and be priced competitively, Culley said. “A home priced too high may get a lot of lookers but not offers,” she said.