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  • Randy Rodenhouse

Interest rates and effect on housing sales



Interest rates can have a significant impact on house sales because they affect the cost of borrowing money to purchase a home. Here are a few ways in which interest rates can affect the housing market:

  1. Affordability: Interest rates can affect the affordability of homes. When interest rates are low, homebuyers can obtain mortgages at a lower cost, which can make homeownership more affordable. Conversely, when interest rates are high, the cost of borrowing money increases, and homebuyers may not be able to afford as much house, which can limit the number of potential buyers in the market.

  2. Mortgage payments: Interest rates also impact the monthly mortgage payments that homebuyers have to make. When interest rates are low, monthly payments are lower, making homeownership more accessible to a broader range of buyers. When interest rates are high, monthly payments are higher, which can make homeownership less accessible, and may cause some potential buyers to delay purchasing a home.

  3. Demand: Interest rates can affect the demand for homes. When interest rates are low, more people may be able to afford to buy homes, which can lead to increased demand. Conversely, when interest rates are high, demand may decrease because fewer people can afford to buy homes.

  4. Refinancing: Interest rates can also affect the number of people who choose to refinance their homes. When interest rates are low, more homeowners may choose to refinance their mortgages to take advantage of lower rates.

We have seen in the last 12 months or so that the demand for houses changes dramatically with even the smallest change in interest rates. For example, rising rates from January through June 2022 lead to steadily slowed sales. Then house sales improved last summer as rates fell in July and August. Then the rates spiked in September and October of 2022 which lead to poor sales in the fourth quarter. Finally, rates then trended down into beginning of 2023, boosting sales early this year. And now the rates continue to go up and now at all time highs (August 2023) which will again slow down the home sales.


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