Soaring interest rates impact those looking for a home in Columbus
UPDATED JULY 8, 2022 AT 11:28 AM EST
Kyle and Amanda Frabott of Gahanna put their home of three years on the market earlier this year because they wanted something bigger.
“It sold within a week, but it's contingent on us finding a home. We spent the next two months looking for homes. We put an offer on three,“ said Kyle.
Kyle Frabott says they were optimistic one of the three deals would work out.
“One of which we really liked, we went $60,000 over $30,000 in the appraisal gap coverage, non-refundable earnest money, no inspection, and we still lost to someone who bid $100,000 over,“ he said.
The Frabotts didn't give up and put a bid on another home.
“The next house that we bid on, the interest rates went up, so our monthly mortgage went up about $400, which put us out of where we wanted to be,” Kyle said.
The Frabotts aren't alone. Homebuyers across the country have decided to backpedal after the largest interest rate increase in more than 20 years.
The central bank raised its benchmark rate by a quarter percentage point in March, by a half a percentage point in May, and by three-quarters of a percentage point in June. The third hike was the largest since 1994.
The move is meant to slow inflation. Real Estate experts at the Federal Home Loan Mortgage Corporation predict that 15% to 20% of potential home buyers will pause their searches in hopes of getting a better deal later in the year. Jennifer Staats of H.E.R Realty is not so sure that will happen. She is the realtor who worked with the Frabotts in their home search. She anticipates the next few months might come with even greater challenges. She said the market has drastically changed.
“In 2018, buyers were able to request inspections and remedies there were no appraisal gaps; we did not have the multiple offer situations,“ said Staats.
Staats said the Frabotts wanted to stay in a specific neighborhood which posed another problem. But their troubles really started with the rising interest rates.
“They get their hopes up every time with every offer that we write, and they hope that they get it. The very first offer that we wrote was [for a home] in Gahanna. We were at $420,000. That home went all the way up to $486,000 with appraisal gap coverage, and that's unheard of even in that neighborhood,” she said.
The Frabotts had to back out of the deal they had to sell their current home.
“It sucks for the people who were trying to buy the Frabotts home, because for two months they thought they had a house,“ said Staats.
The Frabotts said they have decided to do some remodeling and stay put for now.
“It'll be weird, but we'll see what happens. We're going to open up the kitchen and make it more enjoyable. We'll see what happens, see if something changes, and maybe the market looks a little better. Maybe then we'll put ourselves out there again,“ said Kyle.