Interest Rates and How They Affect the Houston Housing Market

Mortgage rates have been in real estate headlines for a long time. The mortgage rate was lower than 5% for about ten years and under 3% for a year. Now the headlines focus on the recent sharp and incredibly quick rise in rates. Focusing on the present rate does not tell the whole story; both home buyers and sellers in the Houston Housing Market should take a longer look at the path mortgage rates have taken over the last few decades.

Was the Increase Necessary?

Real estate professionals in the Houston Housing Market are always watching the fluctuations of mortgage interest rates since it directly affects their business. Homeowners and potential buyers pay attention when their needs intersect with the real estate market, buying, selling, or refinancing a home.

  • Homebuyers understand a higher mortgage rate reduces their buying power. More of their budget goes toward interest and less is available for capital. Even a slight increase can be a deal breaker.
  • Home sellers realize a higher mortgage rate lowers their potential profit. In response to the reduction in purchasing power, the price is lowered to attract potential buyers.

However, the broader picture takes into consideration the health of the national economy. Inflation means money is worth less than previously measured. As a result, the cost of every product will increase to compensate for the loss of value. This can lead to a spiral effect: the rise in interest rates (including mortgage rates) is designed to bring inflation down and ease the economic pressure. This must happen before the national economy can recover. These benefits are hard for individual home buyers and sellers in the Houston Housing Market to appreciate, but they are a healthy step in a broader perspective.

High-Interest Rates are Relative in the Houston Housing Market

Seasoned real estate professionals have a different perspective on this market situation. For the last 10 years, the interest rate has been low and for a few years, it was very low. This has been good for the real estate market and promoted residential mobility. But a 7% mortgage rate is not unusual in a broader view: a few realtors will remember a time when the rate was double the present rate. Here’s what you need to know if you’re considering buying or selling a home:

  • The mortgage rates respond to the economic market and inflation. No one can predict exactly what that means, but when inflation decreases the Federal Reserve will take measures to reduce the interest rates that drive the mortgage rate.
  • Sellers should be patient whenever possible. Yes, there was a time when homes were gobbled up the day they were listed . . . for about 1 ½ years over the last thirty years. Expect potential buyers to view, inspect, and “kick the tires” as they have in the past. A higher mortgage rate adds stress to a buyer’s decision, so be gracious.
  • Most mortgages are made for a term of either 15 or 30 years, but you will have the option of refinancing in the future to take advantage of a lower mortgage rate. Make good decisions to keep your credit healthy.
  • There is no perfect time to buy a home. When the interest rate drops, expect housing prices to increase. If you have the resources and need to purchase a home, do so with confidence.

Professionals in the Houston real estate market—realtors, lenders, and underwriters—feel the pinch as well. Reduced real estate transactions due to higher mortgage rates mean reduced business transactions for us, so we are not fans of higher rates. We are ready to assist you when you are ready!