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The painful reality is that when interest rates are on the higher side, real estate markets don't fare as well as when rates are lower. More noteworthy is the reality that when rates are higher, this usually reflects a stronger economy. So which is better for real estate? A strong economy with higher rates (and prices and wages) or a weaker economy with rates lowered to fuel growth and stimulate economic activity?
During times of a stronger economy, the one element that is critical to a healthier housing market is strong employment. When the economy sputters, jobs are usually lost. Wages often stagnate. When people don't have jobs, obtaining financing to buy a home becomes increasingly difficult, if not impossible.
While much of the higher interest rates we are experiencing now is related to inflation, we also need to acknowledge that inflation can only thrive when people have the money to pay higher prices. Once that faucet for paying higher prices runs dry, sales sputter and prices stagnate or come down. This often includes home prices. Even though our economy is growing at a healthy pace, because rates are higher, more people are renting instead of buying and that in turn is fueling rent-inflation.
BUT, the big but, if the economy were to slow down, and jobs are lost along with buying power, rates will come down to stimulate the economy. With housing, we will still be in a unique position that negates traditional theories. We are still in an under-supplied housing market combined with aging housing stock that requires significant upgrades and renovation, combined with more extreme weather that causes lots of home damage and the need to replace destroyed property, all of which takes away from building new homes and improving the supply of inventory.
So regardless of rates and growth, housing and home prices are almost certain to remain high, although they will adjust in over-built areas or those areas where pricing inflated too far, too fast.
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Ken interprets market data, staying in constant communication and offering valuable insight that then translates into an informed decision.
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