This week’s Q&A column is written by Darlene Duffett of McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant Alexandria market news, contact Darlene at 703-969-9015 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.
Question: Are high interest rates hindering homeowners with lower rates from selling?
Answer: The real estate market has been experiencing a significant slowdown in recent times, and one of the reasons behind it is the low interest rates enjoyed by many homeowners.
With rates below 3%, many homeowners are reluctant to sell their properties and give up their incredibly low mortgage rates. Even if they have a desire to move to a bigger and better house, the prospect of a higher interest rate and larger mortgage payment is discouraging them from doing so.
For example, let’s say a homeowner has a $500,000 mortgage at a rate of 3%. Their monthly principal and interest payment would be approximately $2,100. Now, if they want to upgrade their home and add an additional $100,000 to their mortgage, they would have to accept a new rate of around 6.5%. That would increase their monthly payment to $3,750, which is a staggering 78% increase in their housing cost.
This is a major concern for economists who are tracking the real estate market closely. They believe that the current high-rate environment is not just suppressing buyer activity but is also affecting seller activity. With fewer new listings coming on the market, homeowners are hesitant to sell and give up their low mortgage rates. Unless there is a significant change in their life circumstances, such as a job change, divorce, or more kids, homeowners are not going to make a move with such a significant increase in housing cost.
While economists differ on the exact rate drop required to coax sellers off the sidelines, the consensus is that it will take more than a 1% reduction in interest rates. In the scenario described above, a drop from 6.5% to 5.5% only reduces the monthly payment by $300. A drop to 5% would reduce the payment by about $500 per month, but even that may not be enough to convince homeowners to sell.
The lack of seller activity is also contributing to the shortage of housing inventory in the market, making it difficult for buyers to find suitable homes. This situation is further compounded by the fact that interest rates are currently well above 6%, creating a significant delta of at least 3% between current rates and the rates that many homeowners enjoy.
In conclusion, the low interest rates enjoyed by many homeowners are a significant factor behind the current slowdown in the real estate market. With the current high-rate environment, homeowners are hesitant to sell their properties and give up their low mortgage rates, contributing to the shortage of housing inventory.
While a reduction in interest rates may help coax some homeowners off the sidelines, it may take more than just a slight reduction to encourage them to sell and move to a bigger and better home.
Would you like to receive a valuation of your home? Click here and I’ll get one right over to you.
Darlene Duffett is a licensed real estate agent in Virginia with McEnearney Associates Realtors® in Old Town, Alexandria. She is licensed in Virginia and Washington, D.C. She has built a reputation of partnering with her friends and clients through the homebuying process and loves working with first time home buyers. If you would like more information on selling or buying in today’s complex market, contact Darlene at 703-969-9015, [email protected] or visit her website DarleneDuffettRealEstate.com.
If you would like a question answered in our weekly column or to set up an appointment with one of our Associates, please email: [email protected] or call 703-549-9292.
McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria
In some ways, it wasn’t a great week for shops around Alexandria. Three Alexandria stores had drivers crash into them this week. At the Bradlee Shopping Center, a driver was…
Westbound drivers may want to avoid Duke Street near Landmark next week as construction will shut down part of the road. The closures will affect the westbound lanes on Duke…
Parents and teachers at a School Board meeting last night said the rollout of a new plan to split specialist teachers across schools has been an unmitigated disaster. The change…
Just Listed features a 3 BD/2 BA home with a wooden pergola, slate patio and fenced in backyard.
Are you seeking a confidential space where you can explore your emotions, overcome challenges, and find inner peace? Look no further than our dedicated psychotherapy service! We understand that life can be overwhelming at times, and we’re here to support you every step of the way.
At Peaceful Mind Solutions, our passion lies in helping individuals like you navigate life’s complexities and find the strength to thrive. Our skilled and compassionate therapist is committed to creating a warm, non-judgmental environment where you can express your thoughts and feelings openly. With our personalized approach, we tailor each session to address your unique needs and empower you to overcome obstacles.
Through evidence-based techniques and a deep understanding of the human mind, our therapist will guide you on a transformative journey of self-discovery. Whether you’re dealing with anxiety, depression, relationship issues, or simply seeking personal growth, we’re here to provide guidance and practical tools for lasting change.
Time flies when you’re having fun! The T.C. Williams High School Class of 1973 will hold its 50th reunion July 21-23, 2023 in Alexandria. All graduates and their adult nears and dears are welcome. Events include a Friday evening icebreaker, Saturday dinner dance, and a Sunday brunch. For more information: tcwilliams73.com, 770.789.3534.
Spring Fling at Rising Sol Yoga School
Join us for a day of FREE hot yoga. Experience our class styles and meet our teachers. Buy a bite at the Bake Sale to benefit The Carpenter’s Shelter, peruse some special vendors, take advantage of in-person only discounts on