Interest rates may go up soon, and home buyers aren’t the only ones who will be affected. Today I’ll go over everything sellers need to know about interest rates and home value.
Realtors always talk about how interest rates affect home buyers. Today, however, we’re going to focus on how interest rates affect your ability to sell a property.
First of all, you need to know the 1%, 10% rule. If interest rates go up by 1%, home values go down by 10%. On the other hand, if interest rates go down 1%, home values will rise 10%.
IF INTEREST RATES GO UP BY 1%, YOUR HOME VALUE WILL GO DOWN 10%
Right now, interest rates are at 3.5%. If your home is currently worth $500,000 and rates go up to 4.5%, you will lose 10% off of your home value. In other words, your home value will go down by $50,000. Most people don’t talk about the 1%, 10% rule for home sellers, but it’s something you need to keep in mind if you are considering selling your home.
Here is a quick history lesson for you: in 2013, interest rates were at 4.5%. During 2008, the bottom of the market, interest rates were at 6%. Now, I don’t think that rates will skyrocket and drastically impact the economy in the next 12 months. However, I do think that 3.5% interest rate will look very different at this time next year.
If you are selling your home, you also need to consider how interest rates will affect your buyer. If interest rates go up, your potential buyer’s mortgage payment will go up. Not only that, they may not be able to afford your house if the 3.5% interest rate goes up. If you are looking to sell your property, I recommend selling when rates are low so that more people can afford your home and your home value will go up.
Finally, here in Northern Virginia, there are not many cash buyers in our market. Roughly 95% of people buying homes in our market use some kind of financing, so you need to consider interest rates and the value of your home when deciding whether or not to sell.
If you have any other questions about interest rates or selling your home in the current market, give me a call or send me an email. I would be happy to help you!