4 Reasons Interest Rates Won’t Lead to Lower Prices

With the recent substantial increase in mortgage interest rates, many homeowners have wondered, “Will this finally cause home prices to drop?” The answer isn’t cut and dry. In a market where rates will likely rise even further this year, buyer affordability could take a serious hit. 
 
To give you a better idea of if 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 and what you can expect in the future if you’re thinking about selling:
 
1. More expensive mortgages. A higher interest rate means a more expensive loan payment, but the rate at which they’re rising is astounding. Rates are up 2% since the start of the year, which means the average homebuyer’s affordability has dropped by 20%. 
 
2. Increased rental rates. One often-overlooked factor in all of this is rental rates. As homeownership becomes more expensive and more out of reach for some buyers, rental demand will increase, which means that rent prices will jump up as well. 

 
3. Supply is still short. Although homes are more expensive, the demand for them is still high. 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. Some buyers and sellers are rushing to the market in fear of an impending crash. However, there aren’t many parallels between this market and the 2008 market. That crisis was the result of irresponsible lending practices. Since then, underwriting standards have tightened significantly. 
 
Although rising rates will cause some buyers to leave the market entirely, all of the evidence we’ve seen suggests that home values will continue to appreciate as long as supply remains this low. This is good news for you if you’re thinking about selling.
 
If you are thinking about selling or just have any real estate-related questions, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.