By Chad Taylor
Question: How is the jump in interest rates affecting the market?
This may sound a little crazy to some of you, but I am glad to see rates moving upwards. For too long we have seen interest rates holding at historic lows. Now, don’t mistake me: I am all for affordability. I am thrilled to see our clients taking advantage of low interest rates. That said, I am not thrilled to see complacency in the market. Complacency is a dangerous thing. As I mentioned in my previous column, you won’t know you have missed out on a great opportunity until the opportunity is gone. And that is exactly what has happened to a lot of buyers out there in the open market. While they have been waiting for a “deal” or a “steal” to come on the market, or perhaps the “perfect home,” rates have jumped up almost 2 percent from the beginning of the year. That will make a huge impact on a mortgage payment.
Not to sound like a broken record, but due to extremely low inventory, a seller with a fairly priced home is not in a position to concede much on price (if any at all). In today’s market, the deal may be a 30 year mortgage at 4.5 percent. Which, compared to interest rates of the past, is still virtually free money.
So, what am I seeing today? I just ran the June stats and this is what I see: In the northern part of Prairie Village (north of 75th Street) and including Fairway, Roeland Park, Mission, and Mission Hills, the average days on market has dropped from 63 days in May to 47 days in June. Conversely, inventory has crept up a bit from 2.6 months of inventory to 3.3 months. This increase is not atypical this time of year. Seasonally, we usually see a stall in the market around the 4th of July holiday. To confirm my earlier point about low inventory, the most exciting news for sellers is that homes are selling for an average of 95 percent of original list price. Wow! That is awesome!
Now to southern Prairie Village and nearby areas including Overland Park, Leawood, and parts of Lenexa. The average days on market in this area has crept up slightly from 46 days to 49 days. At the same time, the inventory has dropped from 2.4 months of inventory to 2.1 months. I cannot remember the last time inventory was down to 2.1 months. Incredible! In this area, homes are selling for an unbelievable 97 percent of original list price. And we thought that 95 percent was great (which it is)! It is all about supply and demand. Supply goes down, demand goes up.
My final thought is for the buyers out there. In the past, we have seen times when jumping rates can cause the buyer market to paralyze. Please do not let this happen to you. A mortgage at 4.5 percent is still awesome. Don’t hesitate. It is not worth the risk. And keep things in perspective. I have included a graph of the interest rates dating back to 1972. Only 3 times have the annual interest rates been below 4.5 percent. Three times in thirty years. There’s some perspective for you.
Next week: New construction versus re-sale. What are the pros and cons?
This weekly sponsored column is written by Chad Taylor of the Taylor-Made Team and Keller Williams Realty Key Partners, LLC. The Taylor-Made Team consistently performs in the top 3 percent of Realtors in the Heartland MLS. Please submit follow-up questions in the comments section or via email. You can find out more about the Taylor-Made Team on its website. And always feel free to call at 913-825-7540.
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