Interest rates went up because the economy was too hot. Literally, when the economy is going too fast, which means prices of goods and services, including property, are going up too quickly, the Federal Reserve will raise interest rates to slow down the borrowing of money. That is their tactic for slowing things down. It has worked, but what usually happens is that the economy has to slow down a lot before it can turn the corner again.
Right now our economy is strong, but prices remain high. For the housing market, this is a good thing. Yes, interest rates have slowed down the rate of sales. However, they also have allowed for inventory to go up, increasing buyer interest. Because buyers are able to usually rent the property out for a rate similar to their monthly costs of the property, investors are willing to pay high values and rates in order to acquire inventory.
Will Rates Fall Quickly?
If the economy slows rapidly, meaning sales come to a near stop, the Fed would respond similarly and lower rates quickly. However, what’s currently expected is that prices will have to gradually go down a little before interest rates can begin to be lowered. This is why people are investing in CD’s and other investments that take advantage of the high rates.
Values have dropped in property, a little, depending on the area. It’s not as cut and dry as people think and that’s where working with a local realtor is key. What are the local markets doing that should be your primary focus down to the neighborhoods? It takes time to learn which markets are best to invest in, but also consider the type of investing you want to do.
How The Housing Market Could Be Impacted?
If interest rates remain high for the next five years, which is possible, it would be because the housing market remains strong. The reality is that values are staying strong and there is no sign of them dipping yet, even with current rates. There is no reason for rates to go up again, but if they do, that could have a greater impact on the market.
Can Prices Go Up Even More?
Why do you want to buy a home? Are you looking for one yourself? Are you looking for an investment property that you will rent out? Are you looking for a property you can try to flip in a year if the market goes up? What are you looking for right now, along with where, and your financial options are what dictates your options.
Working with a local realtor can help you see how the market is impacting local markets. The Fed raising or lowering rates can impact your local market, similarly to other markets, or not. Prices can go up, even if the economy slows down. How? There are a lot of people trying to invest in properties. The economy could easily slow down yet you see home values continue to go up, forcing interest rates to also stay up.
What Should You Do?
Build a strategy with your realtor and determine if now is the right time to get into the market either by buying or selling a property. You want someone who knows what properties are doing in your area, what buyers are looking for and what options you have.
