Market Moods: Interest rates aren’t spooking Mid-Atlantic buyers
A Bright MLS survey found that for most buyers, high mortgage rates didn't affect their purchase decision, and many said it's gotten easier to find a home.
- “Cash is king,” but now it’s the buyers, not just the sellers, who want to avoid financing.
- The buyer pool has shrunk, making it easier for active buyers to find homes and leading sellers to offer more concessions.
- Most sellers listed out of necessity, primarily due to a change in their family situation.
Mid-Atlantic buyers shrugged off rising interest rates in September, with more than half saying they were going to buy despite elevated rates.
Buyers in the region appear to be banking on growing inventory and cash offers to balance the higher borrowing costs, according to a Bright MLS survey of completed transactions.
When asked if mortgage rates were a factor in their purchase decision, 51.2% of homebuyers in the survey said no, while about 16% said rates were a factor, but not the main one. Nearly a quarter of the buyers surveyed bought with cash, making the highest mortgage rates in 23 years a non-factor.
The share of cash buyers is even greater than during the height of the competitive pandemic market when buyers relying on financing were often squeezed out.
"The saying 'Cash is king,' is true, particularly now with the mortgage rate environment we're in," said Bright MLS Senior Economist Erica Plemmons, who authored the report. "If you're able to put cash on the table, now it's probably something you want to do."
Mid-Atlantic buyers say it's easier to find a home now
Bright MLS surveyed agents in its coverage areas — Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and the District of Columbia — about their completed transactions. The survey doesn't capture the sentiment of prospective buyers, Plemmons said, but it's clear that as rates rise, many are staying on the sidelines.
"The buyer pool is getting smaller," she said. "Concessions are becoming more normal."
That means buyers able to brush off the higher rates had an easier time finding the right home, she said.
"Our biggest surprise was about the easing of the market," Plemmons said. "Only 39.5% said it was somewhat or very difficult to find the right home, down from 42.9% in June. The amount saying it was very or somewhat easy went up to 46%."
Inventory in the Mid-Atlantic region is up about 15% since June, according to the report. That, coupled with fewer active buyers, means those still in the market have more choices and less competition.
Concessions are up, inspection waivers are down
Multiple offers are still common, but buyers are finding more success with just one offer — and winning concessions from sellers more often.
"In October, over a quarter (26.2%) of listing agents who had at least two listings in the past six months said they had sellers offering closing cost assistance," the report noted.
Inspection waivers, which had become more common during the hot pandemic market, are going back down, while offers of repair credits, new appliances and home warranties are on the rise, Plemmons said.
Most sellers only list if they have to, keeping supply low
Still, the same forces that are keeping buyers on the sidelines are also keeping inventory tight.
"We need more supply," she said.
Homeowners sitting on low-interest rate mortgages aren't eager to sell and give that up.
"The 'Have to Sells' are the majority of the market," Plemmons said. "Family tends to be that top reason." Marriage, divorce, and growing or shrinking families top the list of motivations.
"It feels a little morbid to say, but one of the trends is that some of the new listings in the Mid-Atlantic market are from estate sales," she said. "That does add some supply."
In September, nearly 10% of sales in the Bright MLS survey were from estates. Another 8% cited health reasons, including a move to an assisted living or nursing home, and 5.6% sold because of a job change.
Those surveyed expressed optimism about 2024, largely based on the hope that interest rates will stabilize and even drift lower. In the meantime, most expect fewer buyers to enter the market over the winter months.
"The interest rates will determine whether more buyers can participate or not," Plemmons said. But it's a double-edged sword. "The more buyers, the more pressure on prices. And there will be a higher payment regardless."