It’s no secret… offer prices on homes are dropping. But it's not just a lack of enthusiasm from the buyers that's causing it. It has everything to do with the mortgage rate hikes and their impact on affordability.

So to illustrate how the rising rates have changed the market, let’s look at a recent example from a home we just sold in Irvine. We listed a 2 bedroom condo at $850,000. For perspective, the recent comp was another identical floor plan that we had also sold just 2 months prior for $880,000. 

Naturally, you might assume that with that recent of a sale, the offers on the new identical home would come in around the same value. But instead, the first offer we received was for $825,000, 97% of our list price, but $55,000 lower than the last comp! 

Most homeowners would be insulted by such a low offer, but let’s look at the difference in purchase power to determine why the offer was so much lower. In August, rates were at 4.75%, meaning at a price of $880k, with 20% down, a 30-year mortgage payment would be $3,547. 

But two months later in October, rates had climbed to 6.125%, meaning that offer of $825,000 actually amounted to a monthly mortgage payment of $4,010. That means that even though the offer was $55,000 less than the most recent sale price, the monthly payment was nearly $500 MORE! 

Is it really unreasonable what buyers are asking for now? They are at the mercy of the mortgage rates which are affecting their affordability and purchase power. You can't be upset when offers don’t compare to months ago, because the buyers are simply working with what the market is giving them.

You can't control the market. So instead of chasing it down, be a savvy seller and get ahead of it and price according to supply, demand, and buyer affordability. That’s what our clients did, and ultimately they sold with multiple offers for above asking. Even in today’s market!

So if you want to get the HIGHEST PRICE POSSIBLE for your home today, call me to discuss how we can best position in THIS market! I’d love to help.