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IMPACT OF RISING RATES ON HOME PRICES

Monday, June 13, 2022   /   by Ameil Gill

IMPACT OF RISING RATES ON HOME PRICES

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
416-884-1359

Information is provided exclusively for consumers’ personal use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®.
Information is provided exclusively for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®. Copyright 2022 Last Updated December 3, 2022
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