Will Home Prices Drop With Rising Rates?

By Jorge Gonzalez

Jorge has been selling, managing and investing in both residential and commercial real estate since 1986 and has worked with Buyers and Sellers to navigate them through hundreds of transactions.

The Federal Reserve recently announced that they increased the federal funds rate by 0.75%, which is the largest increase in decades. Many homeowners wonder if this will finally cause home prices to drop. The answer to that question isn’t cut and dry.  Prices aren’t just governed by mortgage interest rates, but also by supply and demand.

As interest rates rise, homebuyers’ purchasing power is reduced. That will directly impact buyer demand since that means many buyers will have to lower their desired price point if they want to be able to afford a home.

However, inventory has a bigger impact on home prices. We’re currently in a strong seller’s market with high demand and low inventory so sellers can wait for a buyer willing to pay their asking price. Some buyers will be discouraged and leave the market, but many more will face our conditions head-on and persevere until they find the home they want. Low supply will likely cause home prices to remain stable or grow over time, albeit slower than they were in the past. Home appreciation may also slow down, but your property isn’t in danger of losing any value in this market.

This is a complex topic to unpack, but I love talking about it. If you have any questions or would like to start the process of selling your home, give me a call or send an email. I’d love to speak with you.