Homebuyers ‘are not letting down’ as mortgage rates rise

Rising mortgage rates and inflation topping 40-year highs aren't deterring some homebuyers who have rushed to secure a rate ahead of what should be a historically competitive spring housing market.

Within the first six weeks of this year, approximately 6,000 homes sold for at least $100,000 above the listing price. That's nearly triple the amount of homes sold during the same period in 2021, which reached just over 2,200, according to Redfin data.

"Buyers are not letting down,” Daniel Del Real, team leader for The Del Real Group, recently told Yahoo Finance (video above). “We expected [mortgage rates] to go up to 3.75% by the end of the third quarter. We saw that in the first 30 days of the year ... Last month, we saw a 29% increase in pending sales. So I think the story’s been told.”

Mortgage rates hit a three-year high last week, reaching 4.16% for the average 30-year fixed rate mortgage, according to Freddie Mac. The more than quarter-point rate increase has left potential homebuyers scrambling to lock in rates before further hikes likely follow with the Federal Reserve set to lift its benchmark rate up to six times this year to tamp down inflation.

“A lot of these buyers are feeling the pressure of inflation, rents going up, costs of goods going up. And they’re seeing that buying a property for them might be out of reach,” Del Real said. “So they’re coming in, they’re locking in 30-year mortgages at 4%, 4.1% when inflation’s sitting at about 7.5%. It’s enough for them to jump off that fence.”

Homebuyers seek ways to stand out

The housing market this year kicked off with record-low inventory levels, prompting buyers to rush to make offers on homes before rates increased further.

According to Zillow, the overall housing inventory dropped to 730,000 home listings in February, down 25% from a year ago. That’s a 48% decrease since February 2020 when there were 1.4 million homes on the market.

As a result, homebuyer competition jumped in February, brushing on records highs. Nationwide, 68.8% of home offers written by company agents faced bidding wars in February, according to Redfin. That’s up from 68% in January and 60.2% a year ago.

As homebuyers face fierce competition, many are seeking ways to stand out in the crowd – through gifts.

"We had a client send a seller to Hawaii to meet up with a daughter that he hasn't seen in a while,” Del Real said. “And so when they were in the home, they were kind of looking for clues and asking the right questions to the seller and the agent. They found out that the gentleman hadn't seen his daughter in over a decade.”

According to Del Real, a gift is an opportunity to connect with the seller in a way that makes your offer worth remembering. Importantly, potential homebuyers offer these gifts with no expectation of getting repaid or the offer.

“We've had Netflix subscriptions, car washes. And if you have 10 offers, and they all have some form of contingency, and you don't have a cash offer, usually it gets a giggle out of the seller,” Del Real said. “And again, it's just a tactic to make the offer memorable, and then at the same time, give you an opportunity to have a seat at the table to potentially get the deal.”

Don’t get too personal

Personalized letters were generally the most accepted and popular form for a buyer to try to convince a seller to pick their offer, however, many sellers aren’t accepting them anymore – at least in California, according to Del Real.

“Letters are not allowed anymore. So that opportunity to tell your story to the seller — the seller wants a family to move into the neighborhood — you can't really write those letters anymore. So now you have to find a different way to try to connect with them. Sometimes the letters can be too personal. And you have to tell buyers, hey, cool off a little bit,” said Del Real.

The strategy with gifts is to be professional, according to Del Real. There’s a fine line between trying to get in the good graces of a seller and going too far.

“Then again, the seller wants to make sure that there's some form of personal connection on the other end. And with cash offers being 20% of the offers out there, there's still that 80% that aren't getting cash offers,” Del Real said. “And with contingencies the way they are, some people still have inspection contingencies and appraisal contingencies, it might take that little difference to secure the deal for you.”

Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.

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