How do Interest rates affect the market

[Miles Atkins]

Getting into investing in real estate and I was just wondering how interest rates affect the market and in what situations would a low interest be good along with a high interest rate. Can higher interest rates make it a better time for property to rent out due to people not able to pay for a mortgage. Any info would be great thanks.

[Chris Martin]

Regarding the topic question, this is straight from the Lennar annual report (SEC 10-K filing, page 3):

"During the second half of fiscal 2022, significant increases in interest rates made our homes less affordable to many prospective buyers and led us to reduce prices or increase sales incentives in a number of our communities."

And on page 11: 

"Further increase in mortgage interest rates could reduce potential buyers’ ability or desire to obtain financing with which to buy homes.

Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022, and the Federal Reserve Board has said it intends to continue to increase its benchmark interest rate in 2023. When interest rates increase, the cost of owning a new home increases, which usually reduces the number of potential buyers who can afford, or are willing, to purchase homes we build."