In the current housing market, it seems like what goes up doesn’t necessarily come down. Let’s explore why home prices continue to rise despite higher interest rates:

Supply and Demand Dynamics:

The dominant factor driving this trend is the extremely limited supply of homes available for sale. In many markets, this scarcity has contributed to higher prices. Even with rising mortgage rates, demand still outstrips supply, pushing prices upward.

DoubleWhammy:

Potential home buyers face an improbable double whammy. Home prices are currently at all-time highs, even with mortgage rates at 23-year highs. The average U.S. rate for a 30-year mortgage recently reached 7.49%. This combination of soaring prices and elevated interest rates creates a challenging environment for buyers.

Compromise and Frustration:

Buyers may find themselves compromising repeatedly and still struggling to find affordable options. Some areas that initially saw price declines due to rising rates have rebounded. Many buyers have had to adjust their expectations, increase their budget, and expand the towns considered to find a suitable home.

Now let’s consider some good news about the current real estate market… here are some advantages of buying a home in the US before interest rates begin to fall:

Lower Prices: 

Although home prices have continued to climb while interest rates are high, the increase has been at a slower pace.  Many industry experts predict that home prices will surge upward after interest rates drop.

Fewer Shoppers:

High mortgage rates have deterred some buyers from the market, resulting in fewer competitors. Buying during this period could give you an advantage due to reduced competition.

Wealth Growth:

By purchasing a home now, you’ll see your wealth grow as property values rise in the coming years. Real estate historically appreciates over time, and owning a home can be a valuable long-term investment.

Refinancing Opportunity:

Home shoppers who buy now may have the opportunity to refinance into a lower interest rate in the next year or two. As rates decrease, homeowners can explore refinancing options to potentially reduce their monthly mortgage payments.

More Attention:

With fewer buyers, you’ll likely receive more attention from real estate agents, appraisers, loan officers, and other professionals involved in the home buying process.

In summary, the continuing rise, (albeit at a slower pace), of home prices has occurred despite rising mortgage rates because supply shortages continue to drive prices upward. The interplay between supply, demand, and interest rates shapes the complex dynamics of the real estate market. Buying in the current environment comes with advantages and disadvantages. For many, the advantages outweigh the currently high mortgage rates, especially with the opportunity to refinance with lower rates in the future. Please contact us if you’d like to learn more about current financing options.