If you have been thinking about selling your home or finally buying one, the housing market just got a little more complicated. A fresh interest rate hike from the Federal Reserve is already changing the picture for both sides of the deal.
The Fed voted 12-0 to raise its target rate from 3.5%–3.75% to 3.75%–4%. It was a 25-basis-point increase and the first rate hike since July 2023. The Fed had held rates steady at each of its first five meetings this year.
The effect hit mortgage rates quickly. The average 30-year fixed refinance rate climbed to 7.14%, up from 6.87% just a week earlier, according to the Mortgage Research Center. The average 15-year fixed refinance rate stood at 6.30%.
What This Means If You Are Selling
Higher rates mean fewer buyers can qualify for a loan. A smaller pool of buyers means less competition for your home and that puts downward pressure on price.
“Fewer buyers equals fewer opportunities to sell the home, less competitive environment,” told Brett Rubin, Vice President at Bowers Group at Compass, to Fox Business. “We’re seeing a lot of sellers struggling to sell their homes in a market that otherwise would be a pretty strong market.”
Rubin said homes are sitting on the market longer, price reductions are becoming more common, and buyers are hesitating.
Joe DaGrosa, founder and chairman of DaGrosa Capital Partners, offered a direct message for sellers: “The retail market sellers are going to realize that they’ve probably experienced 40%, 50% appreciation of their property values over the past 8 to 10 years… I think they’re going to have to recognize that they’re going to take a little bit of a hit if they want to sell.”
He added that homebuilder sentiment is at its lowest point in the past 12 months and may get worse before it improves.
The “Golden Handcuffs” Problem
Millions of homeowners are staying put because they locked in mortgage rates below 4%. Rubin calls it the “golden handcuffs” effect.
“The folks who have interest rates in the 3% – 4% range, they’re not as incentivized to make that move and take on a larger mortgage payment with a higher interest rate,” he explained. “So they’re definitely going to be reconsidering that move if it’s not something that’s absolutely imperative.”
That means fewer homes are coming onto the market. And the ones that do sit longer. It is a squeeze on both ends.
For those who must sell due to a job move, a life change, or other necessity, Rubin was straightforward: “They’re just going to have to weather the storm for better or for worse. Ultimately, if they need to reduce the price, that might be in the cards for them.”
What If You Are a Buyer?
Here is where the news gets a bit more encouraging. DaGrosa said he believes a buyer’s market could be just months away.
“I think it’s going to be a buyer’s market in a few months, and if I were a buyer, I’d be in no rush to buy because I think there’ll be relief from sellers,” he said. “For the average American, my view is there are going to be good deals coming over time.”
Rubin agreed that the spring market will be more revealing. “I’m feeling like there will be a slowdown,” he said. “The spring market will certainly be more telling.”
Both experts described the current environment as uncertain and hard to predict. “It’s the Wild West in real estate,” Rubin said. “The sooner that folks realize that there is no kind of standard market anymore, the sooner that they’re going to realize that this is what it is.”
DaGrosa summed it up plainly: “I think it’s gonna be tough on buyers and it’s going to be tough on sellers.”
If you are watching the market before making a move, patience may be your best strategy right now.
