To put today’s mortgage rates in context: A typical homeowner with an existing mortgage has an interest rate around 4%, according to a new report from Realtor.com. That mortgage holder would have to pay about $1,100 more every month to buy a mid-priced home today with a 7.3% mortgage rate.
Buyers and sellers have been waiting for 4% mortgage rates to return. They haven’t, and they probably won’t any time soon.
Mortgage rates are benchmarked to interest rates on 10-year Treasury notes. Those rates have ranged high in recent months, driving up mortgage rates. And they are expected to remain high, because of lingering inflation, federal monetary policy and other factors.
“I think that mortgage rates are going to remain above the pandemic and pre-pandemic levels,” said Daryl Fairweather , chief economist at Redfin. “So, I think we have to just be adjusting to this new reality.”
That means potential sellers may have to manage their expectations.
Buyers can’t afford as much house now as a year ago, let alone five years ago. Their budget feels stretched. They’ll be less likely to make an offer on a home that needs fresh paint or new roof. They’ll be looking for bargains on the next block.
If they can’t find a home to fit their budget, they may wait on the sidelines, hoping mortgage rates will eventually fall.
Here are a few tips for home sellers in a world of 7% mortgages.
Be flexible on price
A potential home buyer “is in a worse place” now than at the start of the year, because of reduced purchasing power, Ng said. Even a small concession on price could sweeten a potential sale.
But too many sellers “are anchored on a price that may not be in line with today’s reality,” Ng said.
One reason for the slow housing market is that owners “are not lowering their prices,” Fairweather said. “It’s not just buyers that are backing off, it’s also sellers that are backing off.”
Some sellers set a price that draws on comparable sales from years ago, when the market was hot. Today, that price might not be realistic.
“You have to be willing as a seller to take a price that the market will allow,” said Jessica Lautz , deputy chief economist at the National Association of Realtors. “And that might not be the price that was achieved in a bidding war in 2021.”
Before you list your home, “think hard about what, truly, is your ‘walk-away’ number,” Fairweather said. “You need to price appropriately, competitively, so you’re not wasting your time having your home sitting on the market.”
Don’t list a fixer-upper
With fewer home buyers on the market, real estate experts say, a seller should make extra effort to stage an attractive home.
That means hiring a landscaping service, and maybe a cleaning service, and de-cluttering, and finding somewhere to stow your pets during showings.
Home buyers are already sensitive to price, Fairweather said. They may bolt at the first sign of deferred maintenance or overlooked repairs that effectively raise the price.
‘“Move-in ready’ means there aren’t major expenses, or even minor expenses, waiting for a buyer when they move in,” Fairweather said. “Maybe there’s a home down the street that’s just as nice as yours, but they painted the walls.”
Focus on “affordable fixes,” Lautz said. You don’t need to remodel the kitchen. Focus on the easy stuff.
Keep the buyer happy
When a buyer makes an offer on your home, “your work is not done,” Fairweather said.
Pending sales are getting canceled at a higher rate than normal, she said. A buyer may balk at the final monthly mortgage tab, or at fixing everything the home inspection turned up.
In those situations, be ready to negotiate. If the home needs a new roof, “be ready to pay for something like that,” or to split the cost, Fairweather said.
Also consider offering an interest-rate buydown. That’s a financing transaction that lowers the interest rate on the mortgage, at least temporarily. Think of it as a “mortgage subsidy” offered by the seller to the buyer, Investopedia instructs .
“Make sure your buyer still feels good about the home purchase throughout the escrow period,” Fairweather said.
Be patient
If your home isn’t selling, Fairweather said, the problem may not be the price.
Maybe your home is “unique,” she said, and not in a good way: It sits on a busy road, or next to a railroad track, or on a postage-stamp-sized lot.
Homes are spending more days on the market now, Lautz said. Sellers must learn to be patient.
“Sometimes, the strategy is not to price low,” Fairweather said. “It’s just to wait until the right buyer comes along.”
