Rates near 7%, Inventory Up: Why This Market Is More Negotiable Than It Looks

If you’ve been waiting for mortgage rates to make a dramatic move lower before buying a home, the market has delivered a fairly clear message lately:

Not so fast.

Mortgage rates have pushed back toward — and depending on the survey, above — the 7% mark. Freddie Mac reported the average 30-year fixed mortgage at 6.95% on September 17, while Mortgage Bankers Association data for the following week showed an average rate of 7.12%.

Obviously, that’s not the headline buyers were hoping for.

But here’s the part that isn’t getting nearly as much attention: the housing market itself is changing, and that can create opportunities for buyers who are willing to look beyond the interest rate.

More Homes = More Negotiating Power

Nationally, housing inventory has been increasing. The National Association of REALTORS® reported 1.62 million existing homes available for sale in August, representing a 4.9-month supply.

We’re seeing a similar change locally.

In Monroe County, August inventory was up approximately 8% compared with last year, with about 5.3 months of available inventory. Closed sales were lower, while homes were spending more time on the market.

Translation?

Sellers may actually have to negotiate again.

Remember negotiation? It’s that ancient real estate concept from the days before buyers had to offer $20,000 over asking, waive the inspection and possibly name their firstborn child after the seller.

Purchase Price Isn't the Only Number That Matters

When the market slows, buyers often focus on getting the seller to reduce the price.

Sometimes that makes sense.

But another strategy can be to negotiate seller concessions and use those funds toward allowable closing costs or potentially toward reducing the interest rate, depending on the loan program and transaction.

For example, a buyer may be better served purchasing a home at a stronger price while negotiating meaningful seller concessions rather than focusing entirely on getting another $5,000 or $10,000 knocked off the purchase price.

Why?

Because reducing the interest rate can potentially impact the buyer’s monthly payment every single month they own the loan.

Every situation is different, which is exactly why I like running the numbers both ways before a buyer writes an offer.

Don't Forget About Loan Options

Higher rates also make choosing the right mortgage program more important.

At Ruoff Mortgage, we have access to a variety of financing options including Conventional, FHA, VA and USDA loans, along with additional programs designed for different buyer situations.

For example, eligible USDA buyers purchasing in qualifying rural areas may be able to finance 100% of the purchase price. VA financing can also provide tremendous benefits for eligible veterans and service members.

The best mortgage isn’t necessarily the one with the lowest advertised rate. It’s the financing structure that fits your down payment, credit profile, expected time in the home and long-term goals.

So Should You Buy Right Now?

There is no universal answer.

If you aren’t financially ready to buy a home, an interest-rate forecast shouldn’t convince you otherwise.

But if you are financially prepared and have been sitting on the sidelines solely waiting for mortgage rates to drop, I would at least take another look at the market.

Higher inventory can mean more choices.

Longer market times can mean more negotiating leverage.

Seller concessions can create opportunities to structure financing differently.

And unlike the extremely competitive market we experienced a few years ago, buyers can sometimes take a minute to actually think before making an offer.

Imagine that.

If rates eventually move lower, refinancing may become an option. If rates stay elevated, you've already purchased the home you wanted under terms that made sense for you.

The key isn't trying to perfectly time the housing market.

It's understanding the numbers in front of you today.

If you're considering buying a home in Bloomington, Monroe County, Owen County or elsewhere in Indiana, I'm always happy to run a few scenarios before you start making offers.

Sometimes changing the financing strategy can make a bigger difference than changing the house.

— Ryan Langley VP, Branch Manager Ruoff Mortgage

Sources: Freddie Mac Primary Mortgage Market Survey, Mortgage Bankers Association, National Association of REALTORS®, Indiana Association of REALTORS®.

Rates and loan programs are subject to change. Loan approval and program eligibility are subject to applicable underwriting requirements.