Finance Guide Center

How do average real estate prices relate to the interest rate cycle?

In other words, I am asking whether higher interest rates cause real estate prices to be lower or higher, and if a generalization can be made.

Public Comments

1. It's the other way around...the interest rates very often affect the home prices.
2. interest rates are the cost to borrow money, so as rates go up ,affordability goes down. when a market is slow for sellers sometimes an increase in rates will inspire a buyer on the sideline to commit so they arent priced out of market. but too many rises now cause the seller to have to decide if they should lower thier price to entice buyers. if they cannot afford to lower their bottom line then they may decide to sell later when the market may favor a higher price . in a mkt where rates are going down, there is more opportunity to buy and sell,but people sometimes wait for a bottom in the mkts prices causing the seller another decision to lower price., thats when inventory on mkt becomes a driver in decision, if you wait you can lose alot of opportunities to others and inventory becomes picked over and low.
3. Hi I'm a Realtor - see if this makes any sense... When rates go up the borrowers affordability goes down. When there are less people able to afford property the prices tend to relax but not right away. Keep in mind that sellers still have the mindset of yesterdays bubble and they want to profit the old 10-15% per year of previous years. Supply and Demand is a major factor that most Realtors don't understand how to figure out. Here is how you can do it yourself: Look at how many houses have sold this year. Now look at how many active houses are on the market now. Divide how many sold by the number of months have gone by this year so far. So October do 9 because we haven't ended it yet. Now divide that number by the number of active properties. That gives you the number of MONTHS of INVENTORY on the market right now. This is just some of the things we do to price your properties!
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