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Monday, June 13, 2022   /   by Ameil Gill


LET'S CLEAR THE AIR - "rising interest rates" does not always mean "falling prices", or at least, if you're looking at things from a long-term (strategic) perspective!

No doubt, we are experiencing an ever-changing market with rates in flux as the Fed tries to balance the market and battle inflation through various monetary policies. Just from this same time last year, rates are up almost 2.5% for a 30-year fixed-rate mortgage. And while rates have been on the rise for most of 2022, appreciation continues to remain with projections of 11% in 2022 and 3-4% in 2023.

"If the cost of borrowing is higher, then there should be less people borrowing, decreasing demand and applying pressure towards lowering prices." Your way of thinking isn't completely wrong ... it makes total sense to feel that way, but historically it's not accurate — there is not a complete inverse relationship between prices and rates.

Over the past 45 years, we've seen an average yearly appreciation of 5.1% — projections trending slightly downward from two years of double-digit increases. While the Fed continues to increase rates (potentially 10 more times) over the course of the next year, we should expect to see rates tick up and down along the way as it reacts to demand and the overall economy.

Bottom-line: Interest rates DO affect prices, but not in a way we might expect - rates tend to decelerate appreciation, especially in today's market with buyer demand outpacing seller and builder inventory.

Ponder this: Post WWII through the early 80s, home prices increased steadily ... despite 30 years of rising rates (macroeconomics).

#homeprices #homeselling #homebuyersguide #homebuying #realestate #realtor #realestateagent
REMAX Realty One Inc. - The Gill Team
Ameil Gill
50 Burnhamthorpe Road West Sussex Centre Ste #102
Mississauga, ON L5B 3C2

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