So do rising interest rates impact the real estate market? If so, how? This is one question I get frequently these days with interest rates continuing to rise, as you can imagine.
The short answer is it affects affordability, which is reflected in the average monthly payment buyers are going to make on their mortgage. Even so, it hasn’t really impacted the demand for housing… yet.
Buying demand is still incredibly strong and listing inventory is still incredibly low, as you well know if you’re out shopping for a home. There are a couple of reasons for this.
Mortgage Interest Rates
When we look at interest rates and compare them only to what we had last month but fail to consider what they were over the past two, three, or more decades, we make a mistake.
We still have incredibly low interest rates today. For instance, in the 2000s the average mortgage interest rate was 6.29%… remember that? Then, in the 90s, the average rate on a 30-year fixed mortgage was 8.12%!
Today, we’re still averaging under 4% on a 30-year fixed-rate mortgage – at least at the date of this recording.
Millennial Home Buying Generation
Also, the Millennial Generation is quickly becoming the most active buyers in this market. They’re more than ready to get out of renting and become homeowners. Why do you think that is?
It might have something to do with the average rent increase of 15.9% on average nationwide over the last year. Increases like that can be hard to budget in. By purchasing a home, these young buyers are locking in a fixed payment that won’t rise while gaining equity in their own home. It just makes sense to buy a home.
Bottom Line
Keep in mind that we’re told rates are likely to continue rising all the way through 2023, so if you’re in the market it’s my opinion you should lock in your rate as soon as you can. I have several lenders who would be happy to assist you in getting pre-qualified.
So, do rising interest rates impact the real estate market? They absolutely can, and most likely will. Right now, we’re still in a window of time where we have low rates and high demand, which I believe is creating the strong market we are experiencing.
Getting pre-qualified for a mortgage is free, it can be done over the phone, and it only takes about 15 minutes. Just send me a quick text or DM and I’ll get that information to you. Have a great day!