The affect of rising interest rates on our market

Interest rates have risen by almost 2% since the start of the year. From 3-5%. As of now, I havent seen any affect on the strength of the market. It has not cooled at all. Many will speculate that with rising rates, people can afford less home, thus bringing down the overall value of homes. While that sounds like a logical result, I only see that being the case of there is a big shift in the market. If demand were to decrease, or rates rise much higher, these are things that may cause a drop in home values. Not just the single factor of rising rates. 

For those buyers shopping for homes at the top of their budget, for the max they can afford, they must now look for homes at a lower price point. They simply cannot afford the same house. If it was $500k before, their max might now be $450k. The same is true for any price tier. Everyone has trickled down to the tier below. These buyers could become frustrated and decide not to buy at all. Sure. That may affect the market at some point. We'll see if that starts to happen.

Another potential affect could actually jump home prices higher. Many people have refinanced their mortgages to an interest down in the 2 or 3% range. Seeing the rates hit 5% could likely prevent some from selling their current home and trading out their low rate for a higher one. This could lead to fewer homes coming onto the market, which in turn could raise home prices even more...assuming demand remains stable. 

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