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Posted On: August 8th, 2022 7:08PM
How will increase in interest rates impact the real estate market?
As interest rates rise, the cost of borrowing money increases. This has a direct impact on the real estate market by making purchasing power lower and demand for properties decrease. This can lead to slower growth in the market, and allow for the supply chain to stabilize.
Some buyers will no longer be able to afford to purchase a house and will stop looking. This may lower the demand for housing. Buyers who are still interested in purchasing will be looking for a lower priced home because of their reduced purchasing power from increased interest rates. This will put pressure on the sellers to lower their prices. This could shift the supply/demand curve and possibly lead to a decrease in home values.
Lower demand, however may allow some buyers that previously given up to re-enter the market to look for a home. Currently, there are still a lot more buyers than there are properties for sale. Therefore, we are still in a sellers market and the median sales price remains high.
Higher interest rates will make it more expensive to borrow money and increase risk, thus slowing growth . The building of new construction homes will decrease. This slowdown will reduce the demand for raw materials and allow for supply chain to stabilize.
Many factors influence the real estate market and we can't predict for certain what it will be like in 3-5 years. Like all other markets, the real estate market is cyclical and we will likely see a lowering of prices eventually. But what we don't know is when and by how much. One thing we do know, current inventory remains low. It is still a seller's market and prices remain high. If you are considering selling your house, call or email the Premier Properties Sales Team today.
Lic. R.E. Salesperson/Realtor with HomeSmart Homes and Estates
Call or Text: 845-420-4562
Visit me on the web @ www.ChrisCamm.com
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