The Fed Increases Interest Rates Half Percent, Traverse City Realtors Offer Advice for House Hunters
After four years of searching and saving, bar manager Amy Phillips recently moved into her new home in Traverse City. It took several months, several different offers and roughly $9,000 over her budget to make it happen.
At one point, she was worried that the condo she was trying to sell wouldn’t forcing her to pay two mortgages at the same time. Luckily, she got a deal and was able to move into her first stand-alone home.
“There’s just this huge lack [of housing] and this huge demand and with the interest rates going up, you’re just bringing people’s buying power down. It’s it’s very frustrating,” says Marshall.
Currently, the realty duo have houses listed less than a week, and are gone the next.
Now, the Federal Reserve has raised interest rates by a half a percent, creating yet another hurdle for house-hunters, especially first-timers.
“It makes it difficult because that first time buyers, especially, they need to be prepared,” says Cobb. “They need to work on their credit, getting their credit score high enough that they can afford the mortgage, but also not spend the extra money as far as buying furniture or cars or or things like that. But then also having extra reserves or once you do purchase the home, things set aside for that, the details that they hadn’t thought about.”
Phillips was able to set aside extra money to cover repairs needed for her house – that use to house several animals.
Not every first-time buyer can afford the extra savings after sale.
“If you raise that interest rate and you lower their buying power, it takes away their competitiveness,” says Marshall. “We’re getting ready to list a house right in the $350k range, which is a little high, even for some first time home buyers. But with this adjustment, it’s going to make it even more difficult for people to get into the home.”
Marshall and Cobb say they’ve even seen some “hail Mary’s” to try and get offers through.
“Appraisal gap guarantees or not engaging the seller for any repairs from the inspection period,” says Marshall. “We’ve seen things like 60 to 90 days possession free so that the seller can move out at their own pace. We’ve seen things like we mentioned, the appraisal gap guarantees that the house doesn’t appraise. They’ll cover that gap, but it becomes difficult for some first time homebuyers. The other thing we saw just recently was we’ll cover all the sellers closing costs up to $20,000.”
It’s difficult for the first time buyers to compete with negotiations like these. And sometimes the buyers are left feeling defeated.
“It happens all the time,” says Cobb. “I think one thing that we really work hard with our clients about is just not giving up hope. The right house is out there. The home is waiting for the buyer. It really is. And sometimes what we think we we really want, it turns out in the end, it’s three houses later, three offers later that weren’t accepted.”
It can be a hard pill to swallow, especially with a short supply of housing options.
But Marshall and Cobb say patience is key. It also helps to build good credit, save as much money as you can and build a great relationship with a local lender and realtor.