It is national news: The Federal Reserve approved the first interest rate hike since December of 2018 - and says they plan to do it six more times in the near future. So, what do these rising interest rates potentially mean for the housing market?
While no one can be certain, Elite Informer teamed up with real estate advisor Leah Azizian to dive deeper.
How Will These Interest Rates Impact Listing Prices?
Azizian predicts that "as we continue to see rates rise, we’ll gradually see home prices drop as well. In the past year or so, we've seen prices rise due to the low inventory across the country, creating a strong seller's market and lots of competition amongst buyers. However, as we see rates rise and carrying costs increase as a result, we'll start to see the prices adjust and lead toward a buyer's market. This is because housing prices and interest rates tend to be inversely related."
This, of course, makes perfect sense. While this is a prediction, it's grounded in the history of the housing market and the economy. We've been riding a housing-price-high for a long time now. But, that doesn't mean the dip is going to be considered "a crash," although it could be. Just a slight leveling out may be in the future instead of the rampant upturn we've been witnessing.
Everything is Cyclical
Azizian points out that "it's important to keep in mind that the real estate market is cyclical. Every several years, we see trends associated with an economic up or downturn. Changes and fluctuations in the market are normal and expected amongst many of the more experienced NYC investors and developers." While Azizian is based in New York City - this holds true for investors and developers everywhere with experience. These swings in rates, etc. rarely rattle those who have been in the business for a while. That's because they know that everything is cyclical and interest rates are too. They were always bound to come back up after such a dip.
The Long Game
While the prices will change, the value of homes always appreciates over time - if we look at the U.S. housing price index we'll see proof that over time the value of homes always increases despite the cycles in between. Using Azizian's (and other experts) logic there - it's never really a bad time to buy if one has the capital and patience to carry them through the longevity of an investment in real estate.
Interest rates rising has the high potential to temper housing prices - but it's a needed adjustment in this market. They will however, knock even more people out of the market and that is definitely something to consider. One can only wait and see but agents and loan officers should work with their clients in a timely manner as always, before things change.
Leah Azizian's Linked In and Instagram can be found here!
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