Federal Reserve Chair Jerome Powell just said officials are likely to lift rates by half a point higher this month, more than they previously expected, to combat inflation in a stronger economy. Chairman Powell is in Capitol Hill hearings right now, showing that hotter inflation and hiring could lead Fed officials to abandon their recent strategy of raising rates in smaller quarter-point increments. Please Chairman Powell…. please … baby baby … please ... don’t go raising rates too fast.
Interest rates greatly affect affordability in New York. As James Brown famously sang, "The Payback" can be brutal when interest rates are high. When interest rates rise, it becomes more difficult for homebuyers to get a mortgage. "It's A Man's Man's Man's World" where lenders hold the power. Higher interest rates mean higher monthly mortgage payments, which push many buyers out of the market entirely. This leads to a decrease in demand for homes, which in turn can lead to a decrease in home prices.
However, those who can afford to buy a home despite higher interest rates, will be singing "I Got You (I Feel Good)". While the initial cost of purchasing a home may be higher, they may ultimately end up paying less in interest over the life of the loan. This can make buying a home during a high-interest-rate period a smart financial decision for some.
High interest rates can also discourage people from selling their homes. They may fear that they won't be able to afford a new mortgage at a higher interest rate, or that they won't be able to sell their current home for a high enough price to make a move worthwhile. This will lead to a decrease in the number of homes for sale, further decreasing inventory and pushing up prices. "Papa's Got A Brand New Bag," but for some buyers, that bag may be too hefty.
While it may make it more difficult for some to buy a home or encourage some to stay put, it may ultimately be a smart financial decision for others. Regardless of the impact on individual buyers and sellers, it's clear that high interest rates have a ripple effect on the entire housing market, from the availability of homes for sale to the cost of renting. "Get Up Offa That Thing" and take a closer look at how interest rates are affecting your move. If you are “Living in America” and need a home…AskHollingsworth.