The Impact of Rising Interest Rates

How will increasing interest rates affect our real estate market? In the middle of March, the Federal Reserve raised interest rates for the first time in years to slow down the economy and combat inflation. How will this affect you? 

Recently, I was working with a buyer in a multiple-offer situation. They didn’t want to spend more than $700,000, but they decided to offer $720,000 because they wanted to purchase before rates increased. This may seem extreme to some of you, but, in my opinion, it was a smart move. 

"Buyers are reaching to get ahead of rising rates."

Let’s look at an example to see how rates affect your purchasing power. If you buy a house at $720,000 with a 4.375% interest rate, your monthly payment would be the same as if you bought a $700,000 home with a 4.625% rate. It only took that tiny increase to equal the extra $20,000 my client put down. 

There is still a ton of pent-up demand for homes, so it will take a long time for interest rate hikes to cause our market to level off or dip. However, even if prices drop, mortgage payments will be the same or possibly higher. As more buyers realize this, they’ll flood the market. Eventually, things will level off. 

If you have questions about today’s topic or anything else, please call or email me. I am always willing to help.