Interest Rates and Home Sales

Here’s the problem with 6.28% interest. Sure, that lowers demand. But it does that by reducing purchasing power by roughly 10% for every 1% increase in interest rate. We’ve gone from 2.5% in Oct 2021 to above 6 now. That is a HUGE reduction in most people’s purchasing power.

Meanwhile, people with cash or money to spare will buy homes in droves until supply spaces demand for the first time in a long time. We’re still nowhere close to that, though things have slowed. But they’ve slowed from 20-40 offers to about 5-15 offers per home in the first week.

At the current rate, you’ll need to settle in for a 9-24months before seeing any appreciable effects. The pandemic supply crisis took about 18 months to show up on everyone’s radar. Also, 4%-6% is pretty typical for the last 20 years. 2% and3% were the anomalies.