How Rising Interest Rates Will Affect Our Market

By Chris Doherty

Christian Doherty lists and sells more homes than any other agent in the Greater Lowell, Massachusetts market with over 300 homes sold in the past 12 months. Chris is ranked in the top 1% of all agents in the United States.

The Federal Reserve plans to slow down the number of bonds they buy. That means we’ll see up to three interest rate increases in 2022. What does that mean for you and the market? That’s what I want to answer today.

One of the things the Fed has been doing to stimulate the real estate market is buying mortgage-backed securities. This helps keep the interest rates low, but because money has been so cheap, asset prices have skyrocketed. The Fed has seen this rapid increase and decided that the housing market has recovered, so they’re going to stop stimulating this part of the economy.

The government is trying to slow the growth of housing costs in the United States. That means they’ll control the amount of stimulus they put into the market and hope that rising interest rates balance out the prices.

This will have a long-term impact on pricing. When interest rates rise, asset prices go down. However, we still have a housing shortage. I anticipate that interest rates will climb to about 3.75% by the end of 2022. That will help control these prices, but it will take time; it won’t happen overnight.

There’s still very little inventory, which won’t change much next year. Prices should start to appreciate at more normal levels; no more 15% to 20% jumps. However, the last time they started tapering off bond buybacks, we still saw an appreciation of 10% the next year. We will see price stabilization, but it will probably take 12 months or more.

Because our market is based on supply and demand, we will still have great demand even if interest rates go up. 3.75% is still a great rate historically. If you have any questions about this or other real estate topics, feel free to call or email me. I would love to hear from you.