Let’s Talk… Higher Mortgage Rates and What It Means for the Housing Market!

Earlier in the week, the Fed signaled that they were likely to continue raising interest rates to fight inflation. What does that mean for the housing market? 

Well, the amount of house you can afford at, say, a 7% mortgage is a lot less than what you can afford at a 2.75% mortgage, and typically this is a negative for the housing market. 

Here are some of my thoughts about the current and future housing situation: 

• First, keep in mind everybody needs a place to live, and with rents rising, owning a house makes sense even with a higher interest rate. 
• Second, housing is severely supply constrained meaning that there isn’t a whole lot of inventory. The other day, they said on CNBC that the inventory of homes has hit all-time lows with only one and a half day inventory nationwide.
• Third, existing home sales will fare better than new construction because the cost to build has risen due to the cost of goods needed to build a house. 
• Lastly, depending on the state you buy, your house can be a real store of wealth over time. 

In the end, it is my belief that the easy money has been made in housing. You probably won’t get huge gains year over year, but that being said, as a financial advisor, I love it when my clients don’t have a rent payment or housing payment when they start retirement. 

As a side note, the first mortgage I had to buy my first house in New Orleans was in 2006 and the rate was 6.5%.

The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.