Rates are rising, but the market is very different this time around.
We’ve been talking about interest rates going up for a while, but nothing ever happened. Now, they finally went up, and they’re not going to stop rising all year. What does that mean for us? I think what we’re seeing right now is different from what we’ve seen in the past, and I want to tell you why.
Historically, when interest rates go up, prices soften because people can afford less. What’s different about this time?
1. People are not overleveraged. Back in 2006, people kept refinancing and buying more. Everyone was massively overleveraged, but we’re not seeing that today.
2. There is no supply. Everyone wants to buy a house, and that’s great, but there’s nothing for sale. This low supply is going to continue for a while.
3. There is a lot of liquidity. Everyone has cash, and everyone is trying to do something with it. We haven’t seen this level of liquidity in the market in a long, long time.
Why does this matter? The strategy around interest rates is more important than ever. You might be entering and exiting the market at different demand and supply levels.
Let’s say you’re buying new construction. If they finish building in June, you’re not buying today’s interest rate; you’re buying the interest rate in June. That could mean $200 to $400 more on your monthly payment, so it is important to look at where you’re entering and exiting the market.
If you have questions about how to succeed in 2022 or real estate in general, please give me or my team a call. We would be happy to help you.