Know Your Purchasing Power

  • Taya DiCarlo
  • 04/22/22

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Did you know that since the start of 2022 interest rates have now risen a full point?

But what does that mean?

It means that buyers’ purchasing power has diminished that much.

Let's talk about the fact that in November of last year, the dropout rate for escrows, that means deals falling out of escrow or buyers changing their mind, was around 27% here in Los Angeles. That rate by the end of March was around 10%; meaning that not as many buyers were backing out of escrow because they were so stoked that they got their offer accepted. Well word on the street is that we're starting to see that percentage tick up just a little bit.

Why is that? Well, in my humble opinion, I believe that buyers are getting caught up in this feeding frenzy. They're getting caught up in the bidding war. They're offering hundreds of thousands of dollars over the list priced just to compete only to find out that the interest rate they were quoted on a couple months ago, no longer exists. That approval letter that you got a couple months ago, and you've been writing offers every other weekend, you decided to max out your absolute highest capabilities only to find out that that interest rate you got quoted on it doesn't exist anymore. That means your purchasing power is lower than before.

The lesson here is to talk to your loan officer on a regular basis. These interest rates are moving. One week, they could be lower. Then next week they could be higher. If you're not having an open dialogue with your loan officer on a regular basis, you're setting yourself up for failure.

If you do finally get your offer accepted and you beat out the competition only to find out you can't afford it anymore, that's a crappy situation to be in.

Make sure if you are still actively in the market, trying to buy a property in 2022, you need to be in direct communication with not just your realtor, but your loan officer all the time. But that's just my 2 cents.

If you have any questions, or you want to start a dialogue, let’s talk.

Don’t forget to catch up on my weekly show, Taya’s 2 Cents, where share my two cents on different real estate topics from buying and selling real estate, owning a home and more.

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Taya is a California native with 12 years of real estate experience and has sold over $145M in residential sales. She repeatedly goes above and beyond the call of duty to ensure deadlines are made and that all transitions go smoothly. Whether you’re selling or buying, Taya is the kind of Realtor® you can always depend on.

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