How Rising Rates Helps the Financed Buyer Beat the Cash Buyer

A big topic recently is of course rising interest rates. And we are finding that a lot of people are not able to purchase nearly as high as they were previously. Now with that, it sounds negative, right? But what we're finding is something really, really interesting. And I would say I would call it a silver lining really.

Hey there, Chad Rankin with the Rankin Mortgage Team. Here's the silver lining, here's my thought, and this is just what I've seen recently. We got many clients that had been shopping, putting in offer, after offer, after offer, and so getting a little discouraged to be honest with you. But what we have seen in the last five months is a transition to where many people with FHA or down payment assistance preapprovals are getting them accepted because there's just less people offering. Simply because they no longer qualify.

So what we see as the silver lining is that less offers can attribute to less craziness if you will. We were seeing offers regularly in the past at $50,000 above listing price, even more than that. And so now we're not seeing that so much. In fact, we're seeing people get their offers accepted that couldn't for month, after month, after month.

I know a lot of people just got frustrated and stopped looking to be honest as well. So some of those folks are even still qualified. So my message is this: that the silver lining is you may now be able to get the home that you love, whereas you couldn't months ago. And in a theoretical apples to apples comparison, let's say same property five months ago, and then that property today, let's say it was listed at the same price.

Back then, you could have had somebody, two or three people, with 20 offers bumping that purchase price up. Cash buyers that had a lot more cash when the stock market was a lot higher where they didn't need appraisal contingencies, and they were waving them.

So it literally took the finance buyer out of the picture. That is very much gone now. So the finance buyer has a much better shot at it. So that's exciting. And what I think we're seeing is that with those lower offers, home values aren't getting bid up as much. So theoretically, let's say you could buy that same house now without bidding it up at an extra $50,000 or $30,000, and theoretically maybe be buying it for less.

Well, how does that compare to the higher interest rate now? Because your payment now could very well be $400 more a month. Okay, if you save $20,000, divide that by $400, that's a many amount of months. So if that is the case, and I do believe that is the case right now, are you getting a deal? And I think quite possibly.

So here's what happens in a recession, which we know a recession will be coming, mark my words on that. Question is exactly when and when are rates going to drop again? Historically, rates have always dropped during a recession. So with all my clients that are buying now, if they can actually get the house that they love right now and they don't plan on leaving at any time soon, and they are comfortable enough with that monthly payment.

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That's a key right there. If they are, then get the house that you love! Pay the payment that you're comfortable enough. And I promise you, we are going to be paying attention to what rates do and we're going to be back in touch with you just as soon as there's a true benefit to refinance.

The key is you got to be comfortable and you got to love that home. It's got to be something that you want to stay in and something you're comfortable in. And hopefully you can win the house either of now, whereas you weren't able to a few months ago. Thanks again, Chad Rankin: (508)-417-7740, or my information on this page. And call with any questions.