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Interest Rates, Home Prices Continue to Rise

Home prices in Houston and across the nation responded well to record-low interest rates. These low interest rates were designed to help the real estate market and overall economy recovery after the devastating decline in 2008. Prices have gone so high, in fact, that some of us wondered if another housing bubble loomed on the horizon. However, experts say we can all relax. Real estate prices still have a long way to go before matching pre-2008 levels.

While home prices have continued to rise despite the recent interest rate increase, there is still plenty of room for expansion. Some hesitant home shoppers jumped into the market once they news of higher interest rates hit the media, leading to a spike in competition and home sales. But higher interest rates will eventually level out the competition among buyers, as some will be priced out of the market. And, a drop in mortgage applications after the rate increase indicates the housing market may cool off slightly.

The job market is another factor that may influence real estate market growth. While the real estate market has rebounded dramatically, the job market’s overall health is improving at a much slower pace. Buyers must have income and access to credit in order to purchase a home, two things that may be out of reach for anyone still recovering from a period of unemployment. Lenders much adhere to stricter guidelines and credit is harder to get, two things that will hopefully stabilize the economy moving forward.

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