How to Turn Home Owners Into Sellers
Turn Home Owners Into Sellers. Image courtesy of tungphoto / FreeDigitalPhotos.net
Now that the economy is improving, some home owners feel hemmed in to the houses because they don’t want to give up the rock-bottom interest rate they procured in recent years. Essentially, they’re being locked in by the low interest rates — as low as 3.3 percent in late 2012 — that they secured by buying or refinancing over the past few years. Economists worry this group will be reluctant to move now that interest rates are heading back up, exacerbating an already tight housing inventory.
REALTOR® Magazine talked with economic, housing, and lending experts to try to understand how this problem will affect turnover in the coming months and years. You can read more about the so-called “lock-in” effect here.
We also wanted to give you the tools to soothe sellers’ fears about higher interest rates and help them make a decision that makes sense for them. Here are three ways to do that:
1. Add historical context: Remember when interest rates were 18 percent? Well, even if you don’t, reminding clients of the early 1970s and ’80s is necessary for putting today’s rates in the proper perspective place. Buyers still have it pretty good, and the practical effect between 3.5 percent and 6 percent may not be as extreme as it sounds.
2. Add urgency: Sure, interest rates are higher than they were in 2012. But most experts predict they’ll be even higher a year from now. The homebuying process should never be rushed, but if your clients foresee their need to move increasing over the long term, it may make sense to buy while interest rates are lower, relative to possibly higher future rates.
3. Add focus: Remind potential clients that buying a new home really isn’t about rates and figures; it’s about quality of life. It’s about their kids constantly fighting about having to share the same room or their need for a studio space to pursue their artistic endeavors. It’s often harder to predict interest rates over the next few years than it is to predict a family’s evolving housing needs.
Source: “Understanding and Combatting the Rate Lock-in Threat,” REALTOR® Magazine (July 2014)
