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Does it Matter if Mortgage rates are too high if there are no homes to buy?

Monday, May 20, 2024   /   by Matthew Lawson

Does it Matter if Mortgage rates are too high if there are no homes to buy?

With the recent passing of the bi-partisan debt ceiling relief bill the eyes are now back on the Federal Reserve and their plans for interest rates. Interest rates have risen with unprecedented speed since the 2ndquarter of 2022 and it’s put many Americans on notice. Like most of you I’ve felt the strain of the increased rates and the affect it’s had on the cost of goods and services in the area. Just about every business I frequent has had to increase their prices in some way to help cover rising costs of the basics. 

Inflation data is paramount to the discussion of interest rates and it’s the basis from which the FED makes their decisions to increase or decrease rates. As inflation rose during COVID the FED sat idly by unwilling, or unable, to make a decision at what was best for the country regarding rates. After record inflation numbers were reported the FED stepped in and have increased rates at record speed to reach a near 20 year high. 

With inflation slowing the new worry in recent months became the potential US financial default that was narrowly avoided. With the recent debt ceiling bill passed, the focus has returned to the financial markets and the FED’s plan moving forward. Now the question is what is the FED’s plan and how does recent events affect the markets and the housing industry? 

Unfortunately, no one knows what the FED’s plan is, but the general consensus in the housing industry is that interest rates have hit their peak, at least for the time being. It’s impossible to predict the coming months in the market and there are many factors that could push the housing industry in either direction. The banking industry is going to be a key economic player in the next few months as we wait to see what the Federal Reserve has in store for rates. 

Our prediction is that rate increases will either stop, or slow considerably for the remainder of the year. We’re hopeful that rates will drop some, possibly .25% - .5% before years end as inflation slows. Although it’s likely we don’t see 4% rates for some while, we’re expecting rates to start a gradual decline into 2024. 

The housing market here in Charlotte remains strong but is starting to show some signs of strain as rates near 7% and a $500,000 home costs over $3,500/month. Many buyers are being forced to turn to rentals for relief and it’s not uncommon to hear buyers praying for a recession to help with home pricing. Home prices haven’t taken much of a hit and it’s uncertain what to expect for prices in the coming months as inventory remains considerably under market equilibrium. 

Our prediction is that the summer market is still going to remain one of our strongest selling seasons of the year, but the volume of sales will drop by 30% or more. Due to the volume decrease and limited inventory home buyers will be limited on options, driving rental rates up and keeping prices relatively flat. Our concern is that after school returns in August the market will come to a screeching halt until the following spring, or interest rates drop below 6%. 

As always I’m happy to discuss anything real estate related and help anyone considering buyer, selling, or renting. I can be reached at 980-250-2795 or Matt@briggsamerican.com.

Matt Lawson, MBA is the Owner and Broker in Charge of Briggs American Homes, a real estate team at REAL Broker, LLC. Matt lives and operates his business right here in Waxhaw, NC and is passionate about all things Real Estate

Briggs American Homes at Real Broker, LLC
Matthew Lawson
5960 Fairview Rd Ste 400
Charlotte, NC 28210

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