How rising interest rates affect home buyers, home sellers, and professionals alike
During episode 3 of Design Time: From the Floor Up, host Lindsay the Stager interviewed expert stager and staging instructor, Bobbie McGrath. Bobbie enlightens the audience on exactly what is going on with the rising interest rates and how they impact the real estate market.
Meet Bobbie McGrath
Lindsay was bursting with energy at the prospect of interviewing her mentor and friend, the renowned Bobbie McGrath. Bobbie operates her own staging business Successful Staging which specializes in occupied staging and staging to live (follow her on Facebook here). She also owns a training and education business called Occupied Consultation Specialist.
On top of her impressive career as a stager and teacher, Bobbie is also an author. One popular book she co-authored is “Home Staging: The Power that Sells Real Estate”. You can purchase it on Amazon Kindle here.
On top of her impressive career as a stager and teacher, Bobbie is also an author. One popular book she co-authored is “Home Staging: The Power that Sells Real Estate”. You can purchase it on Amazon Kindle here.
What’s the Deal with High Interest Rates?
Lindsay introduces the topic of high interest rates during the interview. The following dialogue is edited for readability:
Lindsay: So here’s what I want to get to the bottom of: I want to talk about the market because there’s no better person to talk about it than with you. I think everybody in the world knows that the interest rates are around six and a half now, and all of this just happened recently at the beginning of the year.
We can’t even talk about the trends that were happening 60 days ago because they’re not even a thing anymore. It’s like me talking about how much I weighed before I was pregnant–not even a thing! I’ve had two children—now the gig is up, right? My stomach will never be like that again, ever! Do you know what I mean?
Bobbie: [laughing] I do!
Lindsay: So now we have to move forward but when you and I give our closing spiel about the imperativeness of staging and how much more you can expect to get, the percentage of it, etc., I don’t even know what to say anymore because it’s changed so much! The crazy over-asking prices we were getting at the beginning of this year all came to a screeching halt in June, I remember it exactly.
What do we say now? How can we even explain what is happening with the market?
Lindsay: So here’s what I want to get to the bottom of: I want to talk about the market because there’s no better person to talk about it than with you. I think everybody in the world knows that the interest rates are around six and a half now, and all of this just happened recently at the beginning of the year.
We can’t even talk about the trends that were happening 60 days ago because they’re not even a thing anymore. It’s like me talking about how much I weighed before I was pregnant–not even a thing! I’ve had two children—now the gig is up, right? My stomach will never be like that again, ever! Do you know what I mean?
Bobbie: [laughing] I do!
Lindsay: So now we have to move forward but when you and I give our closing spiel about the imperativeness of staging and how much more you can expect to get, the percentage of it, etc., I don’t even know what to say anymore because it’s changed so much! The crazy over-asking prices we were getting at the beginning of this year all came to a screeching halt in June, I remember it exactly.
What do we say now? How can we even explain what is happening with the market?
Same Budget, Half the House
Bobbie: Just this morning I heard some statistics and I thought, ‘I’m going to use this,’ because I’m not a numbers person. And well, here’s the deal—it’s simple. Let’s say you want to keep your mortgage payment to $2,500. Back in January of 2021 you would be able to qualify for a house around $750,000. Today if you want to keep your monthly payment around $2,500 a month, you now qualify for a $450,000 house.
Lindsay: Oh my god. That’s like cut in half!
Bobbie: Yeah, it’s almost half. I was just using this information to explain the concept to my client, a seller. I had to help them understand that what they could have bought a year ago, they can’t buy now. And they’re a little hurt and disappointed by that. So now instead of looking at a higher price point, now they’re looking at this lower price point.
What this means for us is that we need to wow buyers from the moment they walk through that front door. We want them to feel like, ‘well, we weren’t able to get THAT house but look at the great house we WERE able to find in our reduced buying power.’ Do you see what I mean?
I don’t like to talk in timelines or numbers; instead I’ll give them an overall idea. Here’s a helpful analogy: if you go to sell your car, what’s the first thing you do? You clean it up, you shine it up, you do all sorts of things hoping that you’ll get some more money out of it. And that’s a depreciating asset! A house hopefully is an appreciating asset, and so of course we recommend investing into it so that our clients can get as much money as possible based on whatever their timeframe and budget are.
We just have to talk to them. I’ll say, “What you could have done 60 days ago—the numbers that you’re looking at saying, ‘oh, my neighbor’s house sold for way more than what we’re expecting to list my house’—understand, that was 60 days ago. We’re not living in that world anymore.”
Unfortunately sellers don’t have access to the current data. That’s one of the reasons I really encourage them to work with an agent, because the agent has more information. They’re privy to the current numbers.
Lindsay: Oh my god. That’s like cut in half!
Bobbie: Yeah, it’s almost half. I was just using this information to explain the concept to my client, a seller. I had to help them understand that what they could have bought a year ago, they can’t buy now. And they’re a little hurt and disappointed by that. So now instead of looking at a higher price point, now they’re looking at this lower price point.
What this means for us is that we need to wow buyers from the moment they walk through that front door. We want them to feel like, ‘well, we weren’t able to get THAT house but look at the great house we WERE able to find in our reduced buying power.’ Do you see what I mean?
I don’t like to talk in timelines or numbers; instead I’ll give them an overall idea. Here’s a helpful analogy: if you go to sell your car, what’s the first thing you do? You clean it up, you shine it up, you do all sorts of things hoping that you’ll get some more money out of it. And that’s a depreciating asset! A house hopefully is an appreciating asset, and so of course we recommend investing into it so that our clients can get as much money as possible based on whatever their timeframe and budget are.
We just have to talk to them. I’ll say, “What you could have done 60 days ago—the numbers that you’re looking at saying, ‘oh, my neighbor’s house sold for way more than what we’re expecting to list my house’—understand, that was 60 days ago. We’re not living in that world anymore.”
Unfortunately sellers don’t have access to the current data. That’s one of the reasons I really encourage them to work with an agent, because the agent has more information. They’re privy to the current numbers.
Higher Interest = More Competition
Lindsay: Bobbie, you told me that you’re busier now with the changing market. Why is that?
Bobbie: Because if you think about it, it’s all about competition, right? If everybody is selling for over-asking and the minute that a house goes on the market it’s just snatched up—staging still helps. But what’s really happening is the sellers are living in fear. They’re afraid that they’ve missed out on the frenzy so they’re trying to get their houses on the market as quickly as possible. You can see people talking about this across the country, that more and more homes are coming onto the market.
So what does that mean for the market? More competition. It’s just like trying to date the high school quarterback. When there’s more competition you doll yourself up.
Lindsay: Good point!
Bobbie: Because if you think about it, it’s all about competition, right? If everybody is selling for over-asking and the minute that a house goes on the market it’s just snatched up—staging still helps. But what’s really happening is the sellers are living in fear. They’re afraid that they’ve missed out on the frenzy so they’re trying to get their houses on the market as quickly as possible. You can see people talking about this across the country, that more and more homes are coming onto the market.
So what does that mean for the market? More competition. It’s just like trying to date the high school quarterback. When there’s more competition you doll yourself up.
Lindsay: Good point!
Actual Square Footage vs Perceived Space
Bobbie: Another important aspect to understand about what buyers are looking for is square footage. When buyers walk into a house and the house feels small, they already know this because on the internet it says it’s 1800 square feet. When the house is really busy and the eye stops and there’s all this stuff in there, the buyer is thinking, “Geez, only 1800 square feet… If only we had bought back then, we could have got so much bigger.” They’re all disappointed.
On the other hand, let’s consider buyers who walk into an 1800 square foot house and say, “Are you sure this place is only 1800 square feet?” That’s when we’ve done our job! Getting my sellers to understand this is really vital. And the agents know this too, they know that it really does make a difference. So now with the competition going up, we have to bring more to the table.
It’s called changing the shape of the money. Some of my stage to live clients have said, “If we sold, we could get twice as much for this house than what we paid for it!” But then they’d have to go out there into that buying pool and they’d have to spend the same money that they spent on this house to get another house a third of the size. It may not make sense to do that for some people.
On the other hand, let’s consider buyers who walk into an 1800 square foot house and say, “Are you sure this place is only 1800 square feet?” That’s when we’ve done our job! Getting my sellers to understand this is really vital. And the agents know this too, they know that it really does make a difference. So now with the competition going up, we have to bring more to the table.
It’s called changing the shape of the money. Some of my stage to live clients have said, “If we sold, we could get twice as much for this house than what we paid for it!” But then they’d have to go out there into that buying pool and they’d have to spend the same money that they spent on this house to get another house a third of the size. It may not make sense to do that for some people.
Design Time: From the Floor Up
Watch full episode, clips, and design tips on our YouTube channel. New episodes air every other Wednesday. And don’t forget to check out our Facebook page.
Interested in appearing as a guest on Design Time: From the Floor Up? Email the producer britney@floorily.com for more information.
And don’t forget to connect with Bobbie:
Bobbie’s Website: www.SuccessfulStaging.com
Bobbie’s Facebook Page: https://www.facebook.com/SuccessfulStaging
Bobbie’s Twitter: https://twitter.com/bobbiemcgrath
Bobbie’s Instagram: https://www.instagram.com/successfulstaging/
Bobbie’s LinkedIn Profile: https://www.linkedin.com/in/successfulstagingbobbiemcgrath/
Interested in appearing as a guest on Design Time: From the Floor Up? Email the producer britney@floorily.com for more information.
And don’t forget to connect with Bobbie:
Bobbie’s Website: www.SuccessfulStaging.com
Bobbie’s Facebook Page: https://www.facebook.com/SuccessfulStaging
Bobbie’s Twitter: https://twitter.com/bobbiemcgrath
Bobbie’s Instagram: https://www.instagram.com/successfulstaging/
Bobbie’s LinkedIn Profile: https://www.linkedin.com/in/successfulstagingbobbiemcgrath/
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