The Impact of Rising Interest Rates on Killeen's Real Estate Market - Article Banner

Rising interest rates have had an impact on every part of the economy, from what you’re saving to what you’re spending. Those interest rates also influence both the real estate sales market and the rental market

This increase in rates is pushing back the buyers who were hoping to buy a home and shopping for a reasonably priced mortgage. Higher interest rates mean more expensive loans, and that’s not going to work for a large part of the home-buying population.

For investors who have other means of financing their acquisitions, not much has changed. The opportunities are out there, and it’s easier than it was to negotiate for better terms. Fewer competing offers are likely to come in, and your sellers may feel pressured to close a deal, even if they have to settle for a lower price or agree to buyer-driven terms. 

If you have thought about selling a property, the rising interest rates may have you wondering whether it’s still a good time to sell, or if you’d be better off renting out the home until the rates start dropping again and the number of buyers in the market bounces back up. 

Let’s take a look at the impact of rising interest rates on Killeen’s real estate market, and what it might mean for you as an investor. 

Buying and Selling Real Estate in Killeen

This is still very much a seller’s market, even if prices have stabilized and peaked. Even if there are fewer buyers looking for homes than there were a year or two ago. If you’re selling a home, you’re looking at a longer wait time and potentially lower prices. But, it can still work out well for you. 

The shift in what you eventually earn and when you eventually close isn’t necessarily because the sales market has changed. It’s more because the mortgage market has changed. Those rising interest rates have made mortgages more expensive. People are still buying homes, but they’re paying more in order to close on a home loan. This is making them less likely to offer a price that meets or exceeds what’s being asked for a home. 

These rising interest rates may be cooling the real estate market and warming up the rental market, and you might be thinking that it’s better to rent out your property. There are arguments to be made for using the more expensive mortgage market to your advantage by renting out the home you no longer want. But, there are also some good reasons to sell in the current market anyway. 

You’re likely to find buyers in the Killeen real estate market who are willing to make cash offers. The interest rates won’t matter so much to them, and closing the deal will likely be easier. You can come to an agreement on a simple, stress-free sale where everyone gets what they want. 

Generally, we recommend selling even in a high-interest mortgage market when:

  • You need to cash out for personal and financial reasons. Your own financial position and needs will help you see the value of selling. You might be buying a home yourself, and you need the cash to make a down payment. Those rising interest rates are impacting you, too, in this scenario, so the more money you have to put down, the cheaper your mortgage will be. Selling your home in Killeen will bring in the money that you need. This is especially true if there’s a lot of equity in your home and you’re confident that your asking price will be met. 
  • You can and should sell your property even now when that property isn’t in great condition and you’re not willing to invest in maintenance and upgrades that would be necessary if you were thinking about turning that property into a rental. Selling a property “as-is” is not unheard of, but you cannot rent out a home in a condition that isn’t safe, habitable, and attractive. Tenants will expect a home that isn’t only functioning but also move-in ready. You may need to invest some money in making cosmetic renovations and repairs. If you don’t want to do that, sell the home so you don’t have to worry about maintaining it.
  • It’s understood that you won’t need the property again. Many Killeen military homeowners who bought property here struggle to decide whether they want to rent or sell when they’re being transferred out of the area. If you’re relocating for work, school, military orders, or some other reason and you think you might return to the area, keeping your home is a good idea. If you don’t think you’ll be back, you won’t need the home and it’s easier to sell it. You’ll be able to walk away from the responsibility.

Don’t be afraid to sell just because the interest rates have risen. If selling is right for you, finding a buyer won’t be impossible. And, the real estate market in Killeen is remarkably strong, despite the higher interest rates. You’re going to make money.

Leveraging the Interest Rates with Higher Rental Rates

For many investors, renting out a home is more profitable right now than selling that property. That’s because demand is high and supply is low. The rental market, like the sales market, is subject to shifts and trends. While rising interest rates and inflation are difficult for everyone in the economy, it is having a positive impact on the rental market. 

Mortgages are more expensive, which means that potential homebuyers are continuing to rent instead of buying. All those homebuyers who would have been moving out of rental homes and into the homes they bought themselves are continuing to rent. 

There’s also a population of renters who are currently selling their homes or have recently sold their homes, and instead of buying a new home, they’re choosing to rent a property until the interest rates make buying less expensive. 

All of these things, driven in large part by higher interest rates, are creating a larger pool of tenants in Killeen and the surrounding areas. These are well-qualified renters who are looking for attractive homes in good neighborhoods. If you have such a home for rent, you’ll have an easy time attracting and retaining these tenants. 

The strong rental market can help you if you own a home to rent out. There’s a lot of demand, and you’ll have no trouble finding tenants and collecting a comfortable (and recurring) rent.

When you choose to hold onto your property because you’ve read the market and you know the rising interest rates are going to benefit rentals, here’s what you have to look forward to: 

  • You’re holding onto a valuable investment that’s only going to grow in value. When you rent out your property, your equity increases. So does your long-term ROI.
  • There’s a home waiting for you if you return to Killeen or need a place to live. If you are relocating now and you think you might come back later, having a home to return to will be one less worry when it’s time to move back. 
  • When you keep your property occupied, you have tenants paying down your mortgage. When you still owe money on your Killeen home, you can use the rent you earn from your tenants to pay down the loan, which means the asset is becoming more valuable to you. If your mortgage happens to be paid off or you have a delightfully low monthly payment, a lot of the rental income you earn will be total cash flow. That’s passive income.
  • You earn a number of tax benefits. Renting out a property, you’ll need to declare the rents you earn as income. But, you can reduce your tax exposure by making deductions that are unique to rental property owners. You can write off your mortgage interest, depreciation, and expenses for maintenance, property management, and other professional services. 

Renting out your property instead of selling it when interest rates are high allows you to take advantage of a strong rental market. You’ll earn short-term and long-term income while you wait for a stronger sales market to sell your home.

The Role of Killeen Property Management 

In the current real estate market, what’s the role of your Killeen property management company

We allow you to avoid all the work and stress that comes with being a full-time, hands-on landlord. 

We can also advise you about market trends and what to expect from rental values, vacancy rates, tenant demands, and legal requirements. 

Partner with a Killeen property management company, and you’ll have experienced professionals taking care of the leasing, management, and maintenance. This will allow you to enjoy the benefits of being a real estate investor without having to understand the laws and regulations or take on the risk and liability involved in owning rental properties. You won’t have to market your home, screen tenants, or create lease agreements. Your property managers will do that for you. 

Rising interest rates are impacting the sales and rental markets in Killeen. With rents going up and many buyers shying away from the market, it’s a good time to measure your options when it comes to what you want to do with your property. Contact us at Shine Residential Management. 

Property ManagementA property management company based in Harker Heights, Shine Residential Management cares for exceptional single-family homes throughout Central Texas, including in Killeen, Temple, Belton, Copperas Cove, Salado, and Georgetown.