The Rate Rush is Over and Home Buyers Rethink Their Positions

    Real estate is local. Here is Orange County CA we seem to be ahead of the curve. Whatever I read about on a national real estate scene it seems like we have “been there and done that” in the OC. Here in the OC the push to buy homes before the rates went up is past and buyers are rethinking their positions. This weekend at an open house I had two telling experiences. My listing is fairly priced and on the market only two days. A cash buyer made a verbal offer at about 6% off the price and a young couple said to me that it would cost them $500 more per month to buy this house that it would have a month ago.

    Home buyers in Laguna Niguel and Dana Point rushed to get that much-desired home and lock in the all-time low rates this spring. This combined with very low inventory created multiple offers on any properties that were desirable and affordable (relative terms, I know). Half way through June the rates began to rise from the mid 3s to the mid 4s and higher. During this rise some buyers were lucky enough to get in contract and lock rates. One of my buyers caught it on the rise and locked at 4.2%. She is very happy she did.

    Home buyers seem to be cautious right now, wondering if the rates will bounce back a little or keep on climbing. I certainly can't tell you. During the term of my real estate career we were always thrilled to see rates below 5.5% and below 5 was almost unheard of. Yes, I have the story of getting 9.75% on my first house and bragging about it but we all know the prices were much lower back then.

    The other thing I have noticed over my sixteen years in real estate is that when rates and markets change it takes a while for the buyers to process the information and get used to the idea. I think that is what we are seeing right now. Since rates have risen the buyers are now paying 25% more for their borrowed money so the purchasing power is less. Back to the lender they go to figure out just how much home they can qualify for in this new environment. Added to that is the August Slump which comes every year. That is my term to describe the slowdown due to families getting vacations out of the way and preparing for school, or taking that freshman off to college. Never fear, home sellers, the buyers are still out there and will come back in mid September if not before.

    It is the investors and flippers who will probably not be back for awhile. That is good news of course for minimal-down home buyers. Cash is still king and there are plenty of those buyers out there in all price ranges if you home is priced correctly.

Ron Buck, Realtor®

Ron Buck has been a real estate broker for 16 years with over 450 successfully completed transactions. He is a 11-year resident of Laguna Niguel and is an expert in south Orange County real estate. You can contact him at Ron@JonRonRealEstate.com or 949.456.0505.