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How Rising Interest Rates Can Affect The Waltham Housing Market

How Rising Interest Rates Can Affect The Waltham Housing Market 

It probably seems that you are not able to escape inflation right now, whether it is in your own pocket or in the news.  The Federal Reserve Has begun to raise short term interest rates.  However, this does not happen without creating an impact across the economy.  Let’s go over how raising Fed interest rates affect home buyers and others.  

Why Did the Fed Raise Interest Rates?

The Fed has two major missions when it comes to their hikes, one is to moderate the long term interest rates and the other is to stabilize prices.  If you have been keeping up with the news lately inflation has been a hot button topic.  There are several reasons for the rapid pace of price increases in the economy right now.  The only thing that the Fed has total control over is the federal fund rate.  

When the U.S. central bank raises federal funds rate, it is doing so to attempt to curb inflation.  However, since the federal fund rate is the rate at which banks borrow from each other overnight, it really impacts all interest rates across the board, due to all the other lender rates fluctuating with it.  The Fed must  balance a desire to control inflation with the negative impacts it can have on the economy.  The idea for these rate hikes is to make it more expensive for people to borrow money.  So what does that mean for the housing market?

How The Federal Reserves Affects Home Buyers & Sellers

When the Federal Reserve raises the federal fund rate, it tends to lead to higher interest rates across the economy.  Mortgage rates are no exception.  Let’s take a look at how these rate increases impact buyers, sellers and homeowners.  

How Home Buyers Are Affected

Even though mortgage rates and the federal fund rates are not directly correlated, they do tend to follow the same general direction.  This means that a higher federal fund rate ensures a higher mortgage rate for new home buyers.  This has several effects:

  • Qualifying for lower loan amounts:  The amount from a preapproval from lenders depends on both the amount you put down along with the monthly payments that you can afford based on your debt-to-income ratio.  Because your monthly payment will be higher you will have a lower loan amount that you can handle.  This can impact first time buyers due to them not having the money from the sale of a home to offset a lower loan amount with a higher down payment.  

  • Price Range:  You may experience difficulty finding homes in your price range.  As rates keep increasing, sellers will typically end up not raising prices or even lower them if they do not receive an offer.  It is important to know that this will not happen right away as of the lack of inventory on the market.  For this reason, pent-up demand could sustain higher prices for quite a while.  Some buyers may be temporarily priced out of the market.  

  • Higher Mortgage Payments:  This would mean that you would be attributing more of your monthly income to your mortgage payments. 

  • Buying vs. Renting:  When costs of property values shoot up typically we see rent move faster than mortgage payments, even with higher rates.

This can be a difficult market to digest and operate in whether it is your first time buying or you are just simply looking to relocate.  It is ideal to consult a professional Waltham real estate agent to ensure that you are getting what you want without overpaying!  A knowledgeable real estate agent will be able to help you navigate the market during current market trends.  

How Home Sellers Are Affected 

If you are looking to sell your home, you may feel there is no better time than now.  Given that house prices have risen 21.23% this year, at this time.  As rates continue to go up there are certain things to consider:

  • There May Be Fewer Interested Buyers:  Higher rates simply mean that more people are going to be priced out of buying a new home until they see a decrease in rates.  This can leave your home sitting on the market longer before finding a buyer.  

  • Finding a New Home:  One of the things that make your home so desirable is that there is not a large inventory out on the market in these current conditions.  That means that when you go to look for a home to transition into you will be faced with the same reality.  

  • Price:  Your home may not sell for what you expect it to.  This is the hardest part to predict because inventory is so limited that prices may remain higher in areas for longer than they normally would.  However, at some point the frenzy for housing will end.  

If you are looking to sell your home and are not sure how to properly navigate the selling period contact a local Waltham real estate agent! They will be able to walk you through each stage depending on your goals till the closing.  

Contact Hans Brings Today!

These rates can cause panic in the market with both buyers and sellers.  The truth of it is that there is limited inventory on the market, but that does not mean you can not find success in buying or selling your Waltham home.  Hans is more than happy to offer his expertise to ensure that you get the result that you are looking for.  Contact Hans today for more information by calling him at 781-891-9993 or by filling out a contactform on the website! 


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