Rising Interest Rates and Market Demand
Allen Tate Companies President and CEO Pat Riley says higher rates feed “buying frenzy”
After years of record-low interest rates, the real estate market is starting to change. Rising interest rates and affordability are beginning to play into buyer demand for tight inventory – and for now, increasing market intensity.
“Never before in history have the majority of Americans had mortgage interest rates locked in below 3 or 4 percent,” said Allen Tate Companies President and CEO Pat Riley in the May edition of Carolinas Market Update.
Today’s interest rates – now in the low 5 percent range – are still lower than the historic average of 7 percent since World War II, and vastly different from double-digit rates of the early 1980’s, when buyers often paid discount points to lower their rates.
“The Fed is challenged to find the right rate to cool things down without paralyzing the economy. When this happens, buyers are compelled to jump on the homeownership train, before rates go even higher,” Riley said.
While some potential buyers will choose to sit tight, or wait until interest rates recede, the decision to do so will keep them from buying a home at a reasonable mortgage rate (along with deductible interest).
“Buyers can’t afford to give up their search because their desired home is not on the market yet or be scared off by cash buyers or competing offers. We know other buyers who are ready to sell, and we can find you the home you want that’s not even on the market yet,” Riley said.
“Sellers need to make their move while homes are still appreciating, and before buyer interest diminishes because of rising rates,” he said. “This is an opportunity, and you can’t afford to wait.”
Carolinas Market Update is targeted to consumers in the Charlotte, Triad, Research Triangle, High Country, Highlands/Cashiers, and Upstate S.C. regions. It is produced every other month by the Allen Tate Companies and features information, statistics, trends, and predictions about the real estate market in North and South Carolina.