Rising Mortgage Rates Mean High Prices but Less Competition
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.