Today’s post is brought to you by Randy Trahan.
Recently, we have seen interest rates spike from historic lows. Late last year and earlier in May of this year, 30 year fixed rate mortgages dropped below 3.5%. Now, they are up to 4.57%.
The rule of thumb is that for every 1% change in the mortgage interest rate, one’s buying power is effected by roughly 10%. If a person qualifies for $300K mortgage and the interest rate suddenly increases by 1%, they will only be able to afford a $270K mortgage.
We know what this means for home buyers, but what does it mean for home sellers? It means that as interest rates increase the demographic of the potential buyers for their home changes. This may not be significant unless the home seller is on the cusp of a major price boundary. For example, if a seller’s home is worth $530K and the interest rate increases 1%, all of the initial potential home buyers will now be searching in the “Below $500K” range. The above $500K homes will essentially disappear from sight of many potential buyers. The graph below shows the relative activity of the home price categories in the Boulder area.
Additionally, the graph below shows a trend may be developing due the effect in rising interest rates.
I have seen some dramatic price reductions in my own neighborhood over the last month. Maybe some of the home prices were too high to begin with. This is why it is so important to have a real estate broker who will help you price your home correctly when your home first goes on the market. After the first thirty days on the market, interest in your home starts to dissipate as new homes come onto the market. 
If your home is priced correctly (i.e. True Market Value), you will be showing your home to the majority of buyers looking for a home in your price range.
The chart below shows what the experts forecast for the latter part of this year.
The good news for sellers is housing inventory is currently very low, so sellers should have little problem getting a reasonable offer quickly if their home is on the market for a fair price.
The good news for buyers that we are still at a very low interest rate and you can buy more for your money than almost any time in history.
Please feel free to comment on the information that I have presented. I can never learn too much about the real estate market. I will be happy to talk with you to answer any questions you may have.
Please contact me with suggestions for future short articles.
Also, if you want specific market statistics about your neighborhood or town, please contact me and I will gladly share my findings with you.
Randy Trahan
720-217-1875