7% Rates Killing Local Real Estate Sales

The recent increase in national interest rates has caused
quite a stir in the real estate industry, and it is not
surprising that many prospective homebuyers are feeling the
pinch. With interest rates hovering around 6.97%, it's no
secret that home sales will decline. The real question,
however, is how buyers and sellers can navigate this
situation to ensure that their interests are protected.


In Morgan Hill, San Jose, and Gilroy, the 30-year fixed
loan interest rates for those with excellent credit are
about 6.46%. While this may seem like a small difference,
it can add up to thousands of dollars over the life of a
mortgage. So, what can buyers do to get the best deal in
the current market?


One strategy that buyers could use is to "house hack" by
purchasing a multifamily home instead of a single-family
home. In this scenario, the buyer purchases a property with
multiple units, living in one unit and renting out the
others. By doing so, the buyer can offset their mortgage
payments with rental income, which can be a significant
advantage in a high-interest-rate environment.


Additionally, buyers should focus on multifamily units of 4
or less to get advantageous interest rates as an
owner-occupant. This is because loans for properties with
more than four units are considered commercial loans, which
come with higher interest rates and stricter lending
requirements.


Buying a multifamily allows buyers to get more bang for
their buck, as they can potentially generate income while
still building equity in their property. It's a smart
strategy that can pay off in the long run, especially in
the current market.


However, buyers should also be aware that the coming months
of March, April, and May tend to be big sales months that
will be depressed by these higher interest rates. This
means that there may be less competition in the market,
which could work to the advantage of buyers who are looking
to purchase a property.


Sellers, on the other hand, should consider offering seller
financing in order to attract more buyers who are
struggling with currently high interest rates. This option
allows the seller to act as the lender, providing financing
to the buyer in exchange for a promissory note and a
mortgage or deed of trust. Seller financing can be an
excellent option for buyers who may not qualify for
traditional financing or who are looking for a more
flexible loan structure.


However, it's important to note that seller financing may
not be possible for sellers who have a current loan on the
home. In this case, the seller may need to pay off their
existing loan before offering seller financing, which can
be a significant hurdle.


Overall, the current high-interest-rate environment
presents both challenges and opportunities for buyers and
sellers in the real estate market. While higher interest
rates may cause home sales to decline, savvy buyers and
sellers can still navigate this situation to their
advantage.


For buyers, house hacking with a multifamily property and
focusing on properties with 4 units or less can be a smart
strategy. For sellers, offering seller financing can be a
way to attract more buyers who are struggling with
high-interest rates. Ultimately, success in the current
market will depend on staying informed and being willing to
adapt to changing conditions.


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My goal is to share my insights and opinions relating to
real estate so that you can make the best possible
decisions in achieving your real estate dreams. If you are
interested in buying, selling or investing anywhere in
Silicon Valley, Morgan Hill, San Martin or Gilroy - I would
love an opportunity to discuss with you what I can do to
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