In more than 30 years as a full-time realtor in Reading, I've navigated all types of market conditions - the good, the bad, and the OMG ugly!
Since the beginning of the year, conventional mortgage interest rates have roughly doubled, from about 3%. to 6%. Additional rate increases are said to be likely. This could negatively impact many would-be home buyers in the short term. On the other hand, cash buyers may benefit from a better bargaining position.
Keep in mind that a 6% interest rate is more the norm, historically speaking. For a bit of actual history, when my husband and I purchased our first home in Reading (in 1982!), our interest rate was 16.75%. Of course, we paid $84,000 for the house. (Those of a certain age will remember those days!)
Higher interest rates (and more inventory) will eventually exert downward pressure on housing prices.
To illustrate: Assume that HB purchased a home at the beginning of 2022 for $1,000,000. HB put down $200,000 cash and financed the $800,000 balance with a conventional 30-year mortgage at 3%. HB's monthly payment is $3.372.83.
Assume now that the interest rate is 6%. Assume further that HB wants to keep his down payment and his mortgage payment the same. Using these assumptions, HB can only afford a mortgage of $562,560 and a purchase price of $762,500. HB's purchasing power has been reduced by $237,500 - or 24%!
I am seeing indications that prices are beginning to soften. Price reductions, increased days on market, fewer bidding wars, etc.
If you are looking to sell your home, a bit more patience may be needed as days to offer will likely increase. Based on many years of increasing values, prices are still strong in our area, though bidding wars will be less common.
If you’re in the market to buy, or to buy up, this is a good time. And cash buyers are also in the driver’s seat.
I’d be happy to discuss your needs. Please contact me for a conversation or a market evaluation.
I grew up in Revere and Peabody; both of my parents worked in the real estate industry. I graduated from Bishop Fenwick High School and then went onto Merrimack College where I earned a BA in Psychology and met my husband Bob, who is originally from Gloucester. After we married, we moved to Reading and raised our two children, Emily and Michael. I am blessed to live near my daughter and grandchildren (they truly are the apples of my eye!). We have been living in town for almost 40 years.This community has earned a place in my heart, we have loved living here.
