How increase in interest rates will affect the real estate market in 2022

By: Taro Chellaram /Newsletter/Jul 08, 2022

How increase in interest rates will affect the real estate market in 2022

2022 has proven to be a pivotal year for the housing and real estate market. With the ongoing Ukraine war on one side, and the rising interest rates on the other, the housing market is seeing a shift from the post-Covid boost. There is one good thing that has come out of this though: More options for homebuyers! According to reports, there is an 8% increase in the number of active listings this May, when compared to the numbers this time last year.

 

Experts are predicting mortgage rates to go as up as 5.5% by the end of this year. If met, it would push home rates through the roof, making it a burden for buyers. Sellers, however, are enjoying these record high prices, as their profit rates have not been this high since the past decade. The Chief Economist of the real estate website ‘Realtor’ shared her views on the market conditions stating that, “The number of homes for sale right now is so low that it’s creating these ultracompetitive conditions for buyers, which are so challenging. More homes for sale will help bring back more balance and sanity to the market.”

 

This predicted increase in interest rates is what will be changing the real estate market for the year 2022. This however isn’t a bad thing. Real estate, despite these high prices, has have a very good year thus far. More active properties also mean more options for buyers, who prior to this, couldn’t find the property of their liking due to the shortage of real estate (or rather the shortage of active listings.) What do these rising interest rates mean for investors? It most definitely is going to change their course of action. Lenders and borrowers are going to be more cautious with investments. When talking about real estate specifically, experts suggest that “Cash-flowing multifamily and industrial assets won’t be as severely impacted.” This was quoted from Richard Ortiz, co-founder and managing principal at Hudson Realty Capital. Just because lenders are going to be more conservative, doesn’t mean that investors need to hold off from investing now. The right kind of deal is what makes a world of a difference. The more stabilized the type of property, the easier the deal going through.

 

Until when can you expect these high prices? Well, it’s a complicated matter! A simple, overall answer to that is – supply and demand need to match. Prices will remain high unless there are more homes in the market than people who are willing to purchase them. Prices are set to fall sometime in the future, as there is only so much a person is willing to pay for a home. More home buyers won’t go higher than the current rates for homes.  



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