TAMPA, Fla. (WFLA) — The Federal Reserve announced a .5% interest rate hike on Wednesday aimed to combat skyrocketing inflation.
Many are wondering what impact rising rates will have on the booming housing market, if any. According to experts, it’s a mixed answer.
For moderately priced homes, it will likely not slow down sales in the near future, they said.
“We’re still very depleted as far as the number of houses available for people out there. So, I think even if prices might begin to plateau out a little bit, I think the demand is going to be there for a little while, so we’re going to see prices grow and also see houses move pretty quickly,” said Stephen Gay, a realtor with the Stephen Gay Group at Smith and Associates.
For the more expensive homes, Gay said he is already seeing sales slow down in recent weeks.
“Above $1 million it used to be, even two months ago, you could throw a crazy number out there and you could get multiple offers and it might even go higher than that crazy number. Now I think buyers are getting more data conscience and looking at what things are really worth, rather than being so desperate to get into anything,” said Gay.
With the price of mortgages climbing, and now expected to jump even higher with the fed raising interest rates, consumers will have to pay even more for their dream home.
“Every percent increase in interest rate decreases your purchasing power by 10%. So that’s a huge impact especially for people especially with these really high prices,” said Gay.
“This tremendous growth we’ve seen in real estate is going to start to tap down a little bit,” said Stephen Overton, a financial advisor with Ameriprise Financial Services.
Overton believes higher interest rates will be felt across the board, from stocks to buying a car to the housing market.
“When you’re looking for a house, the mortgages are now 4% to 4.5%, you can afford less house. That slows down demand for houses. and increases the cost for a mortgage, which will hurt housing,” said Overton.
Yet, experts don’t predict much of a price break anytime soon for homes under a million dollars in Florida.
“In any market it’s always location, location, location, and right now Florida is the location to be. So we definitely will not get hit if there is some kind of slow down in the market like other areas of the country might be,” said Gay. “The problem I think in the lower price point is builders buying and tearing them down, and building back houses, you also have a lot of large investors that are buying them for rental properties, another thing that’s taking a lot of houses off the market is Airbnb’s.”