How the dramatic rise of interest rates is affecting home prices.

A lot of my clients want to know if prices will drop because of interest rates rising significantly. Today I’ll respond to this question by covering the four major things that are going on in the real estate market and how they will affect buyers and sellers over the next few months.

1. Mortgages are becoming more expensive, resulting in a loss of buying power. As interest rates rise, monthly payments will too. People will be priced out, and the buyer pool will become smaller. If you’re a buyer, you’ll be more likely to win in multiple-offer situations.

“Home prices won’t likely drop due to rapidly rising interest rates. ”

2. Rent prices are increasing. Landlords will pass on the costs of rising interest rates to tenants. Would-be buyers will likely return to the rental market, increasing the number of tenants and creating more competition.

3. There’s still a national shortage of homes. We are starting to see an increase in inventory levels, but we still have a long way to go before reaching a balanced market. This low supply will keep prices high or at least stable. 

4. We’re not heading into a housing crash. The current market conditions are a result of supply and demand. There are no lousy lending practices sneaking into the market to cause a crash. 

To sum it up, home prices likely won’t drop due to rapidly rising interest rates, but this will vary from market to market. If you want to learn more about what the current market conditions mean for you as a buyer or seller, don’t hesitate to call or email me. I’ll be happy to help!