The Federal Reserve recently approved an increase in interest rates and is planning on implementing more hikes in the coming months in order to curb inflation and preserve the growth of the economy. These climbing interest rates have many people wondering how the real estate market and housing prices will be impacted. If you are interested in buying or selling your home in Jacksonville, Florida, and have questions about the latest real estate trends, North Star Mortgage Network, Inc. is here to help. Read on to learn more about the recent increase in interest rates and how this may influence the housing market.

The Impact of Rising Interest Rates For Homebuyers and Sellers

People tend to assume that when interest rates rise, it makes buying or selling a home more challenging because from the perspective of a homebuyer, rising interest rates will increase mortgage rates, and therefore, it becomes more difficult to afford a home. Rising interest rates also could impact people looking to sell their home because potential buyers may not be able to afford the seller’s desired price, which could diminish the market value of the home and affect the overall profit that could be made from selling it. Typically, housing prices and property values are directly related to mortgage rates, although this depends on the strength of the economy. If the economy continues to prosper, the increase in mortgage rates will not have as significant of an effect on housing prices and property values, because if mortgage rates increase the amount of a monthly payment, a strong economy would allow an employer to increase a worker’s salary, helping to compensate for the increased interest rate.

What Does the Rate Increase Mean For Buyers and Sellers?

Mortgage rates have already begun to increase even before the latest interest rate hike because of the improving economy after the pandemic, which may cause some buyers to possibly hold off on purchasing a property and cause some sellers to adjust their pricing expectations, which could moderate the appreciation of housing prices. Another factor that may affect the housing market is that numerous homebuyers had the opportunity to lock in very low interest rates when they purchased their home, making them less likely to relocate as interest rates continue to rise, creating a higher demand for more housing. Since the demand for housing continues to remain high, housing prices could continue to grow. However, as rates do rise, the ability to afford a home could become an issue for some potential buyers, causing them to pull back from the market and force sellers to readjust their prices, resulting in a moderation of housing prices. It is likely that the housing market will remain competitive as the labor market improves and wages are increased.

If you are interested in buying or selling a home in Jacksonville, Florida, and have questions about the recent increase in interest rates, contact North Star Mortgage, Inc. today for a consultation.