AgentMarkets & Economy

How might rising interest rates impact the market?

Increased rates could decrease the number of qualified buyers as well as sales prices
  • Many real estate agents are concerned that increased rates will mean on-the-cusp buyers might be priced out of the market or that housing gains will stall. When rates do increase, there's little doubt that the impact on the housing market will be significant.
  • A 50 basis point hike could mean a 6 percent increase in monthly payments for new mortgages. This could spell trouble for potential homebuyers who then will be facing increased debt-to-income ratios (DTI).
  • By partnering with lenders who work with underserved borrowers, real estate agents can tap into the market of potential homebuyers who might think that increased interest rates cut them out of the housing market entirely.

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When it comes to the Federal Reserve and interest-rate hikes, it has become a question of will they or won't they. All eyes are on the policy makers as they continue to hedge whether interest rates will increase this year. Just this past month, the Fed delayed increasing rates yet again -- good news for the real estate market, but concerns still linger. An interest-rate increase is seemingly inevitable, but what could a rate hike mean for the housing industry? The story since '08 The real estate market has enjoyed historically low rates since 2008, when the Fed drastically cut interest rates to help the market recover from the housing crisis. Since then, home prices and sales have increased steadily, and buyers have become accustomed to low rates and relative affordability. Many real estate agents are concerned that increased rates will mean on-the-cusp buyers might be priced out of the market or that housing gains will stall. When rates do increase, there's little doubt that t...