Are interest rates causing potential sellers to stay put rather than sell?

Yes, interest rates are causing potential sellers to stay in their homes. This is nationally as well, not just in the Bay Area or Marin County where I am based. As I wrote in a previous Sound Off, sellers today are what I call six the Ds: Death, Divorce, Diamonds (marriages), Diapers (new babies), Downsizing and Departure (moving away and not repurchasing).

The reason is two-fold: Homeowners who have interest rates around 3% need a very solid reason to move. The higher rates are making the move almost impossible from an affordability standpoint. And if the homeowner can afford to make higher payments on a larger house with higher interest rates, they can likely also afford to keep their existing home, as renting it out would cover their mortgage payment.

The second reason? We don’t see as many downsizer sellers as in years past, due to substantial capital gains many baby boomers would be subject to at sale after a couple’s $500,000 deduction before their appreciation is subject to capital gains.

The good news is that today’s new home buyers are now accustomed to 6% rates, so they are out looking to purchase, but the lack of inventory created a very strong sellers’ market.

Bottom Line

Connect with The McCarthy + Moe Group if you have any questions about what you’re reading or hearing about the housing market.

Source: San Francisco Chronicle