Interest rates are a crucial factor in the real estate market. They can have a significant impact on property values, and it’s essential to understand how they work. Interest rates are the cost of borrowing money, and they can fluctuate based on various economic factors. When interest rates are low, it’s easier for people to borrow money, and this can lead to an increase in property values. On the other hand, when interest rates are high, it can be more challenging for people to borrow money, and this can lead to a decrease in property values.
One of the most significant ways that interest rates affect property values is through mortgage rates. When interest rates are low, mortgage rates are also low, and this can make it more affordable for people to buy homes. This can lead to an increase in demand for homes, which can drive up property values. Conversely, when interest rates are high, mortgage rates are also high, and this can make it more expensive for people to buy homes. This can lead to a decrease in demand for homes, which can drive down property values.
Due to policy changes in the lending market the natural order of things are being tampered with. So as when interest rates are high people who normally would need to sell are being offered alternative ammortization lengths to be able to facilitate debt load. In short… you are paying rent to the banks. There is a positive light to this though as it makes real estate an even more attractive asset class than before. If you are able to retain property even when you shouldn’t this will obviously produce a negative effect on supply. This coupled with high immigration and endless federal injections of money will inevitably drive property prices higher. There is a reason funds like Blackrock are buying residential real estate and becoming landlords and it’s not because they are trying to help and provide for us common folk.