Should You Sell Your Home When Interest Rates Are Low?

Factors to Consider Before Putting Your Home on the Market

a person hands house keys to a man and woman
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Interest rates have reached historical lows in 2020. The average 30-year fixed mortgage interest rate in August 2018 was 4.55%, and in August 2019, it was 3.62%. As of August 2020, rates averaged just 2.91%. 

Low mortgage rates can create a seller’s market as they spur buyer demand. The promise of lower-cost financing encourages on-the-fence buyers to start shopping for homes, creating bidding wars. These boost home prices and eventually give sellers more power. 

Of course, a low-rate environment doesn’t always mean you should sell your home. If you’re considering putting your house on the market amid historically low mortgage rates, think about these factors.

Every market is different. For instance, interest rates can vary by state. Be sure to consult a local real estate agent to ensure these factors ring true for your specific region.

Reasons to Sell a Home When Interest Rates Are Low

Sellers can expect more than a few benefits when rates are low. 

More Buyer Demand

Houston real estate agent Kristina Morales told The Balance via email that rates can speak to how motivated buyers are, as well as how much competition they might expect for their property. 

“Selling in a record low-rate environment is great for sellers because it creates buyer demand,” Morales said. “Depending on inventory levels—how many homes are available at any time for sale—this environment may also create buyer competition.”  

Nationwide, inventory was down in August 2020, with 36% fewer homes available than in August 2019.

Before deciding to sell your home, understand your local market’s current housing inventory.

“If there are a lot of homes on the market, sellers will be competing for buyers,” Morales said. “At a minimum, it will create a neutral buying-selling environment. If inventory is low, then sellers can expect increased buyer competition, resulting in shorter days on the market and premium prices.”

Greater Home Sale Profits

Low mortgage rates allow homebuyers to more affordably buy a house, or even buy a higher-priced home more comfortably, essentially increasing their homebuying power. When demand outpaces supply, it also leads to bidding wars. These bidding wars may eventually lead to higher home prices at the market level. 

“It’s a seller’s market because borrowing money is now cheaper,” Michael Sema, founder and CEO of lending marketplace Get a Rate, told The Balance via email. “When rates come down, homebuyers typically can afford more.” 

According to Sema, buyers can afford $60,000 to $70,000 more with today’s rates, but will pay the same monthly payment as if they’d bought a less-expensive home last year. Because buyers can afford more, a homeowner has more leeway to raise their property price.

“It’s beneficial for sellers because now they can ask more for their homes,” Sema said. 

Faster Home Sales

Increased demand means more competition among buyers, which typically means homes go off the market faster. For sellers, this equates to fewer open houses and inconvenient visits. 

“When buyers are competing for homes, sellers may enjoy getting multiple offers in record selling time,” Morales said. “Buyers must move quickly and make their offers super competitive to win.”

According to Realtor.com, homes are selling five days faster than a year ago.

More Negotiating Power

Homeowners selling in a low-rate environment enjoy more power in negotiations, according to Kerry Melcher, head of sales and brokerage at online homebuying company Opendoor. High levels of competition encourage buyers to waive contingencies, pay far more than asking price, and pull out all the stops to win a home.

“Due to higher overall demand, many buyers are more flexible and open to working around a seller's preferred closing or moving dates—anything to make their offer more attractive,” Melcher told The Balance via email. “Buyers are asking for fewer concessions, and sometimes agreeing to pay above appraisal price.”

Low-Rate Benefits for Home Sellers

“Sellers can also benefit from the low-rate environment when they go to purchase,” Morales said. Sellers can lock in great lower rates, as their buyers did, and upgrade to a bigger or more expensive home. 

The low-rate environment can also speed up a homeowner’s buying timeline, which means sellers could potentially sell their home much faster.

“Low rates can empower people to buy property earlier than planned, giving them the opportunity to invest in a home that may have previously been out of their budget,” Melcher said. “This may help them afford their dream home earlier than expected.”

Remember, though: Sellers will also meet more competition when buying their next property, which means paying premium prices. For homeowners that want to avoid these conditions, refinancing may be an option.

Refinancing will allow homeowners to take advantage of low rates, without entering the high-demand, high-cost homebuying market.

“Low interest rates create an opportunity for sellers to refinance in lieu of selling,” Morales said. “Deciding to sell or refinance will depend on the seller’s life plans. Both can be very advantageous for sellers.” 

Low Interest Rates and Your Home Sale

Clearly, there are benefits to selling a home in today’s low-rate environment. However, if you’ll be buying a new property after the sale is complete, consider the competition and higher prices you’ll face as a buyer. You may want to think about refinancing as an alternative.

Key Takeaways

  • Low rates allow buyers to spend more on their home purchases, while still keeping their monthly payments affordable.
  • Low interest rates create more buyer demand and more competition, which drives up prices, may lead to a faster home sale, and provides more negotiating power. 
  • If you’re selling a home and then buying a new one, you’ll enjoy lower interest rates, too. You may also face more competition though, and pay more for the home as a result.

Article Sources

  1. Freddie Mac. "30-Year Fixed-Rate Mortgages Since 1971." Accessed Sept. 9, 2020.

  2. Freddie Mac. "Mortgage Rates Fall." Accessed Sept. 9, 2020.

  3. Realtor.com. "Frenzied Buyer Demand and Low Inventory Ignite Double-Digit Growth in Home Prices." Accessed Sept. 9, 2020.