Here’s the impact that rising interest rates will have on home prices.
With the recent substantial increase in mortgage interest rates, many homeowners have been asking, “Will this finally cause home prices to drop?” The answer isn’t cut and dry. In a market where rates are predicted to rise even further this year, buyer affordability could take a serious hit. To give you a better idea of whether or not your home is poised to lose value in the coming months, I’m going to address four key points that explain what’s happening to buyers in the real estate market:
1. More expensive mortgages. This has already priced some buyers out of the market, and if rates continue to rise as expected, it will price out even more of them. This is going to make the pool of potential buyers for your home much shallower, resulting in fewer offers.
“Continued low supply will keep property values up.”
2. Increased rental rates. As homeownership becomes more expensive and more out of reach for some buyers, rental demand is only going to increase, which means that rent prices will jump up as well.
3. Supply is still short. The increased interest rates have also caused home sellers to stay in their homes longer, and our typical spring and summer surge of inventory just isn’t happening right now. Low supply is good news for homeowners because it will keep your property values up.
4. We’re not headed for a crash. The current market conditions are merely a result of low supply and high demand, not bad lending practices.
My two takeaways for sellers are to take action now and don’t wait until the market turns. For buyers, every time rates go up, your monthly mortgage payments get less affordable. That same house you’re looking at now is going to cost you several hundred dollars more each month you wait.
Although rising rates are going to cause some buyers to leave the market entirely, all of the evidence we’ve seen on the ground points to home values continuing to appreciate as long as supply remains this low. This is good news for you if you’re thinking about selling.
If you have any questions about selling your home or the real estate market in general, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.
