According to Federal Reserve Board Chair Janet Yellen, interest rates will most likely rise this year. “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target,” Yellen said, adding that Fed officials expect growth “to strengthen over the remainder of this year and the unemployment rate to decline gradually.” This article from CNBC takes a look at the effect rising interest rates could have on the housing market, and those looking to purchase homes.
When it comes to interest rates, what goes down eventually must go up.
And as interest rates begin moving back up to more “normal” levels, that could spell trouble for home prices.
When the bottom fell out of the housing market in 2007, the Federal Reserve responded by pushing borrowing rates to record low levels. Those very low interest rates helped the housing market get back on its feet by making it cheaper for buyers to own a home. As of this summer, the average selling price of a single-family home has made up all the ground lost to the housing bust.
Now, if interest rates go back up to more normal levels, the cost of buying a house will also rise. That could put pressure on home prices, which have bounced back more than 50 percent since bottoming out in early 2012.
For homebuyers who lock in relatively low rates now, the cost of homeownership is still pretty affordable – but a lot depends on where you live.
