Interest Rates Just Went Up on the Buyer of Your Flip

You just closed on your new investment property. In about 165 days (the average time to flip a house in early 2026) you will be launching your flip into the market.¹ Potential buyers will no doubt love your choices of kitchen cabinets, tile in the bathrooms and updated landscaping…what they will not love is that the 30 year fixed mortgage hit 7.15% on September 22, 2026, up from 6.26% a year earlier.² What do increased interest rates mean for your fix and flip investment?

Surprisingly, this actually works for you on the buy side. Economists at the San Francisco Fed studied 92 million listings and found that a one-point jump in mortgage rates in turn triggered a 3% drop in list prices within weeks.³ Don't expect every seller to comply. Owners facing a loss often price high and wait it out. Higher rates also trigger the lock-in effect (an owner with a 3% mortgage won't sell and take on a 7% one). The FHFA estimated lock-in kept 1.33 million homes from selling between mid-2022 and the end of 2023, and the shortage pushed prices UP 5.7%.⁶ That means you will have to do more leg work to find that perfect opportunity.

Although there will be fewer cheap houses to buy, there will also be fewer competing listings when you sell. Your sweet spot is with the seller who can't wait (an estate, a job move, a tired landlord). Right now 20.4% of listings have taken a price cut, and the typical home sits 60 days.⁷

Here is what you have to take into consideration. Say your end buyer can afford $2,489 a month. A year ago that bought them a $400,000 loan. Today it buys about $368,000.⁸ That $32,000 doesn't come out of their pocket... it comes out of YOUR sale price. And flippers don't have much room to give: the average gross profit on a flip (sale price minus purchase price, before rehab and holding costs) was 25.4% in early 2026, down from 29.6% a year earlier.¹

MAKING IT WORK 

                                                                                                  

Protect yourself before you close. First, figure your ARV (After Repair Value - what the house sells for once it's fixed) based on recent sales at today's rates, not last spring's. Second, budget for holding costs past the 165-day average, since your listing can sit 60 days on top of the rehab time. Third, have a second exit: if it won't sell at your number, run rent and refinance numbers at the current rates and see if the payment still works. If the deal only makes money at last year's price, pass on it.

That's how we look at your deal at Delarosa Lending Group. We lend against today's value and today's exit. A loan built on last year's number hurts you first and us second. 

Sources

1. ATTOM, Q1 2026 U.S. Home Flipping Report, June 18, 2026. attomdata.com

2. Freddie Mac, Primary Mortgage Market Survey, September 17, 2026. freddiemac.com/pmms

3. Federal Reserve Bank of San Francisco, “House Prices Respond Promptly to Monetary Policy Surprises,” Economic Letter, March 27, 2023. frbsf.org

4. David Genesove and Christopher Mayer, “Loss Aversion and Seller Behavior: Evidence from the Housing Market,” Quarterly Journal of Economics, 2001. papers.ssrn.com/sol3/papers.cfm?abstract_id=262098

5. Solveig K. Erlandsen and Ragnar E. Juelsrud, “Downward Nominal House Price Rigidity: Evidence from Three Centuries of Data on Housing Transactions,” Norges Bank Working Paper 1/2023. ideas.repec.org/p/bno/worpap/2023_1.html

6. Ross Batzer, Jonah Coste, William Doerner and Michael Seiler, “The Lock-In Effect of Rising Mortgage Rates,” FHFA Working Paper 24-03. fhfa.gov/research/papers/wp2403

7. Realtor.com August 2026 Housing Report, September 2, 2026. prnewswire.com

8. Author's calculation: 30 year fixed, fully amortizing, same $2,465 monthly payment at 6.26% and 6.95%.