Rates a tick better, buyers starting to come back, listings are up as well.

After a solid year of adding inventory to what was a ridiculously tight inventory, we now have a healthy 3-4 months of inventory. I was getting a little nervous as the inventory was rising and new buyers did not seem to be coming to the plate. Well anecdotally for me that seems to be changing as well. It seems the slight improvement on rates and seller's willingness to help buyers with loan costs and buy downs, has brought weary home shoppers back to the playing field.

Activity is up on all fronts which is welcome news for us Realtors® since we have not been as busy this year so far as we expected. For buyers the interest rates at 7% were causing problems in our expensive local market. 

Here is the basic difference between 7% and 5% interest on a median range home in Clark County, WA. A $500,000 house using an FHA loan at 7% with typical closing costs and taxes produces a payment of $3937 per month. This requires under most underwriting guidelines at least $8000 per month in income and that presumes there are no other debts held by the buyer. $8000 a month works out to 96k a year. Drop that rate down to 5% and the corresponding payment drops to $3225 per month. This lower payment requires an income of at least $6500 to qualify, again without any other debt service. This is $78k a year. This means a single person with a better than average job can buy at 5% but needs a partner with income to buy the same house at 7%. This rate differential also allows the buyer with $95k income to still qualify even with a few other debts like a car payment.

Since the slow down in sales has been largely due to the abrupt rise in rates eliminating many qualified buyers, it stands to reason that sellers can entice these formerly qualified buyers with a rate buy down. Having seller's offer a closing credit is nothing new. It seems however that buying the rate dow is more important than standard closing costs.  

Rates have settled into the mid 6s for many buyers and depending on the day $10,000 in buy down moves that rate into the low 5s. This is a game changer for first time home buyers and could also be reason enough to get someone that is currently in a low interest loan to sell and either upsize of downsize. Many people are holding off listing their home due to the fact that they hold a low interest mortgage and do not want to lose that comfortable payment. With the recent rate drops and the notion of a buy down, the difference between the low rates of a few years ago and the attainable rates today is much closer and may make the difference for homeowners ready to move either up or down.

If you are a buyer consider asking your agent about writing offers with a seller buy down to help qualify in our expensive real estate market.