Will Rising Rates Affect Home Prices?
After over a decade of fairly lenient monetary policy, the Federal Reserve has recently decided to begin slightly raising rates to help to temper inflation-related concerns. Will this cause housing prices to crash? The answer is complicated.
While no one can know for sure, there are some factors to consider that may help put you at ease. First, let’s discuss some of the recent changes:
Between Feb. 2021 - Feb. 2022, home prices have increased by nearly 20%.
Rates are now averaging 5.1% up about 1.25% from 3.76% a year ago.
An increase of 1% in mortgage rate will translate to about a 10% decrease in purchasing power for the average buyer.
On the surface, this decrease in purchasing power may seem concerning. The National Association of Realtors (NAR) expects about a 9% decrease in overall demand within 2022. But despite this, the NAR actually expects about a modest 5% increase in home values to take place during this same time. One of the primary reasons for this is that there has been a shortfall of 6.8 million homes available for purchase. This shortfall in turn is being driven by
So, whether you’re buying or selling, now is still a great time to do it. We recommend you work with a qualified realtor who can help you navigate this current and future market so that you can achieve your unique goals. Contact us today to learn more.