Interest Rate's Massive Effect When You Sell Your House in Torrance

(April 1, 2015)

Torrance city sign

Torrance is a wonderful Southern California city.  

Torrance homeowners have seen a nice increase in home values over that last few decades, even with the housing crisis.  What we are facing now, though, should be on your mind if you are going to sell your house in Torrance.  

Low Interest Rates Means Buyers Can Afford a Larger Sales Price

We have had the luxury of historically low (artificially low) interest rates for the last couple of years.  Most of the time, buyers have a certain amount they can afford to use as a down payment and there isn't much wiggle room on that.  Most importantly, it's the monthly payment that determines what buyers can afford to pay for a house.  In the chart below, you can see for yourself just how much of an impact that low interest rates have had on home price appreciation.   

Maximum Mortgage Amount Graph

From John Burns

In the last year, interest rates have fallen almost 3/4 of a percent, which has resulted in almost 10% price gain.  The mortgage payment to most buyers, not all, is more important than the price of the home.  If someone can afford to make a payment every month, then why not buy the most expensive house that you can?  And the real estate industry loves to talk about sales price over anything else.  It's what drives the market.  Higher prices mean higher commissions.  It's a boon for the entire industry.

What does this mean for you when you sell your house?

At some point, these artificially low interest rates will have to start to rise.  Basically, our government is subsidizing this.  The hope being that low interest rates will keep the housing market strong.  But just like with any other stimulus, it will have to come to an end.

And when interest rates start to rise, you, as a seller, can potentially lose out on tens of thousands of dollars when prices start to fall.  Why?  Because the buyers won't be able to afford the same payment.  

Is it time to sell your house in Torrance?

If you are planning on living in your beautiful Torrance home forever and ever, then no, it doesn't make sense to sell.  If you are waiting for the right time to sell your house, then it may be now.  Each 1/4 percent of interest rate increase will be damaging to home prices.  And remember, it's Spring.  If you are thinking about when to sell your house, with the combination of low interest rates and seasonal peak in sales, the time is now.

Did you inherit a house in Torrance?  Download the free guide to help you sell your inherited house.

inherited house

Jennifer Shenbaum

Written by Jennifer Shenbaum

Jennifer Shenbaum is a real estate investor based in Southern California. She is a veteran of the housing market crash of 2007. Best of all, she offers free remodeling ideas to all who ask.

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