Will Rising Interest Rates Hurt Your Chances to Sell Your Home? When to Get Into the Market for Maximum Profit

When to Get Into the Market for Maximum Profit

For someone trying to sell their home, interest rates can be either a blessing or a curse. When the rates are low, more buyers flood the market. But when rates rise, the flood dries up and a home could wind up sitting on the market for far longer than the seller would like.

Rising interest rates have been something sellers have had to deal with through most of 2018 thus far. And, according to the experts, they’re not going to drop any time soon. So, what’s a seller to do? How can they maximize their profits when the rates are rising? First, it is important to know how the interest rate affects your chances of selling your home.

rising interest rates

How Rising Rates Affect Buyers

All it takes is for the interest rate to climb 1% to have a negative 11% impact on how much a buyer can afford to spend on a home. Even a simple change of 0.25% has a negative 3% impact on affordability. In a real-world example of this, a buyer who can afford to buy a $300k home at today’s rate will only be able to afford $267k if the rate would rise by 1%.

For many buyers, this type of change in the interest rate can completely knock them out of the market altogether, while the rest will be paying more for “less home.”

rising interest rates

Interest Rates Aren’t the Only Thing to Affect Your Profit Potential

As big of an impact as a change in the interest rate can have on your profit potential, it is not the only factor you have to be concerned with. Other factors that can have positive or negative effect on your profit include:

  • Supply and demand (the greater the demand, the higher your price can be)
  • New home inventory (the more new homes that are built, the higher the supply will be and your price will likely have to drop)
  • Stock market valuations (higher stock market valuation allows buyers greater flexibility for cash outs and portfolio diversity)
  • Job environment (when the national job environment is strong, there are fewer distressed homes on the market, and this helps stabilize prices)

rising interest rates

Ways to Maximize Your Profit Potential When Rates Are High

Just because interest rates are rising doesn’t mean you won’t be able to sell your home. People still need homes, even in times of higher interest rates. It just may take you longer to sell and you may have to put in more effort to make your home stand out.

Some ways you can improve your home’s odds of selling include focusing on curb appeal, performing minor repairs or improvements, and getting a home inspection report and appraisal. The prior two will help make your home more attractive to buyers, and the latter two will help inform you as to your home’s value and what needs to be done (if anything), so you can use that information in your negotiations.

When Is the Right Time to Sell Your Home?

The best time to sell your home is… whenever you need to sell your home. Not everyone has the luxury of waiting and planning to sell their home and listing it in the spring (traditionally the best time to sell). Some are forced to move quickly and for a variety of reasons, like changes in employment, health, financial issues, and more.

Even though rising interest rates will most likely cause you to forfeit some of the profits you planned on gaining, the reality is if you must sell your home, then you must. Accept that you will likely lose a little bit, but at the same time, put in the work to help improve your position.