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With mortgage interest rates at the highest mark since 2009, there’s an extra layer of urgency for buyers in a home market where prices already have been pressed up by demand.
The quest for affordable loans is reflected in the resurrection of adjustable-rate mortgages—commonly known as ARMs—in which borrowers pay a discounted rate in the early stages, typically four to seven years. After that, whatever the current interest rate is kicks in.
“A lot of buyers are interested in seven-year ARMs because it gives them time to refinance if interest rates drop down again,” explains Susan N. Giove, president of the Delaware Association of Realtors and broker associate at Mann and Sons in Rehoboth Beach.
As interest rates rise, more buyers are expected to take advantage of government programs, such as loans through the Veterans Administration (VA). At the height of the market, VA loans and other paperwork-intensive mortgages put would-be buyers at a disadvantage with sellers. When competition is fierce, cash is king.
“Delaware is a unique market because of the influx of out-of-state retirees who are coming from more expensive places, like New Jersey,” Giove says. “Last year, we had a number of buyers in the $1 million-plus range who paid cash.”
These days, a little air is going out of inflated prices.
“We see prices stabilizing and maybe coming down a bit,” Giove says.
At the market’s zenith, buyers offered such sweeteners as waiving inspection and paying the sellers’ share of Delaware’s 4% transfer fee, the highest in the nation. While it remains a seller’s market, buyers are making fewer concessions. Real estate pros also are pressing to roll back the transfer fee to 3%.
Hot amenities on buyers’ wish lists include gourmet kitchens, attached garages and extra rooms that can serve as home offices. “In-law suites also are becoming more popular, as are pole barns where people can do hobbies and work on cars,” Giove says.
At the height of the COVID-19 pandemic, some buyers bought homes sight-unseen. That’s still a strategy for out-of-area buyers eager to put in a bid. Giove recently showed a house in Milford via FaceTime for a couple in Maine.
“The challenge is to find a home that suits their needs. If something decent comes on the market that is priced right,” she says, “it doesn’t last.”
Related: Meet Delaware’s Top Real Estate Agents of 2022
