Anyone still buying with increasing interest rates?

[Jessie Kristie]

Hello,

Just wondering if any investors are still buying in Huntsville/Madison area with increasing rates in current market. In CA, I’ve been seeing price reductions with some remaining on market for longer than 90 days. What do y’all think about the Huntsville market?

[Wale Lawal]

@Jessie Kristie

Rising interest rates do have a very noticeable effect on buyers and sellers. Hypothetical situations prove that property value and housing prices directly correlate to mortgage rates, but what underlies both scenarios is the health of the economy.

If the economy grows fast enough, rising mortgage rates will not have as great an effect on property value and housing prices. For example, if mortgage rates increase one point, monthly payments increase by $238; however, a strong economy allows employers to increase salaries enough to help compensate for the rising interest rate.

As long as the economy continues to grow, and the economy continues to see job growth and wage growth, a rise in interest rates should not paralyze the housing market.

As mortgage rates rise, the effect on real estate investing can be positive. The market for rental properties will increase because fewer people can qualify for mortgages. That said, rising interest rates reduce prices, so it can sometimes be better to buy during a rising interest rate environment.

Moreover, as interest rates rise, fewer real estate transactions will take place since lending standards will be tighter. Thus, more people will need rental properties until they can afford a mortgage. A 1% increase in interest for an investor can turn into a windfall of profit in the right housing market.

All the best!