Higher interest rates absolutely makes it more difficult to buy and sell in our industry...in all facets...residential, commercial, and agland. I will concentrate on residential and agland today.
This will definitely be an interesting year for real estate.
Please note that current home mortgage rates are in the 6% range and are changing up, or down, daily. Pay attention to them!! (February 8, 2022) Please check current interest rates with your lender...if possible, daily.
In residential, the higher interest rate means it is harder to find the entry level buyers with the
buying power and desire to purchase smaller + more expensive Versus staying as a renter. This will impact move up buyers as well.
I also am concerned that current entry level home owners will find it increasingly harder to sell due to lack of equity in their home if the markets soften and they appear to be doing so in some areas. This can/will eventually trickle up to higher end sellers like the homes shown in this photo.
This also means: condition versus price becomes even more critical. Homes need to have a short honey do list and any major and most minor repairs done or expect a less than full price offer and inspection or appraisal issues/requirements!
In agland, I believe the buyers with deep pockets will be the main focus of land purchases and those with little available cash will not be the buyers simply due to interest rates versus commodity prices. A case of the big getting bigger if you will.
I hope this is not true and I am wrong as we need smaller farmers and younger farmers to be able to purchase agland. (That is a blog for another time.)
I have not seen Nebraska agland values drop...yet...but that may be coming soon.
Why? Cost versus profit!
IE: Cost of land (taxes, rent/land payments, insurance) and input (seed, fertilizer, planting, fuel, etc), and cost of maintaining to maturity of the crop (water, tilling, disking, etc), and harvest costs (cost of combining, fuel, freight costs to elevator or bins, etc) and equipment repairs/maintenance Versus Income of harvested crop.
Luckily, current commodity prices today for corn in Nebraska is in the $6.75 to $7.25 per bushel range and beans are in the $15.25 range for March 2023 delivery.
However, December 2023 delivery is about 15% less. That could go up or could go down. We might see more early contracts for fall harvest than in recent years.
No matter what...whether you are a real estate agent or broker...or in a related field for any type of real estate, expand your knowledge base and understand what is going on in your area!
Yes...cash buyers do exist...but I know very few who will/or can leverage actual 6 or 7 figures of cash versus getting a loan. I cannot stress how important it is to understand the lender rates and any restrictions.
So pay attention and educate yourself as rates and prices are changing daily!! So should your knowledge!
Feel free to share this email with your clients. If you have questions or want to talk with me...give me a shout. Let's have a great year in spite of the Feds!!
Hope you are having a great week! Mike Check out the article here:
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