Higher mortgage rates in the coming months could be a blessing or a curse for homebuyers struggling to contend with record-breaking home prices, says Realtor.com. Though they will likely make buying a home more expensive all around, higher interest rates will also cut out some tight competition, which could eventually drive prices back down and stabilize a frenzied market.
Those higher rates could indeed make home buying more expensive for many as their monthly mortgage payments get bigger. But in this paradigm-breaking market, higher rates could also prove to be a boon for buyers in some markets by keeping prices in check and lessening competition. That could make home buying less expensive if buyers aren’t spending as much on their homes and engaging in crazy bidding wars—possibly a welcome lifeline for many first-time buyers who’ve been barred from homeownership by record-high prices.
For some, higher interest rates are a double whammy of bad news. Home prices in most competitive housing markets will still remain high. And after buyers purchase homes, they will be paying more in interest. So buying a home will be more expensive all around.
“It’s going to be less affordable a year from now than where we are today,” warns Leonard Kiefer. He is the deputy chief economist at Freddie Mac, the government-backed organization that helps support the U.S. housing market.
Advertisement
Related Stories
Housing Markets
Metros Where Housing Prices Have Doubled in Less Than 10 Years
Historical data show it's taken less than 10 years for home prices to double in 68 of the country’s 100 largest cities
Housing Policy + Finance
Even With Inflation Running Hot and Elevated Mortgage Rates, Buyer Demand Rises
Mortgage rates will likely stay high for the next few months, but that doesn't seem to be deterring homebuyers
Financing
Q1 2024 Foreclosure Activity Rises Slightly
Data show New York, Houston, and Chicago topping the list of major metros with the greatest number of foreclosure starts during Q1 2024