Over the pandemic, the US government fought hard to avoid financial fallout and lower economic output by boosting the economy with stimulus checks and financial support measures.
When mortgage interest rates increase, a mortgage for a particular value costs homebuyers more. For example, person A might have taken out a 30-year fixed-rate mortgage of $300,000 with an interest rate of 2.5%, meaning they faced monthly payments of $1,449.
As mortgages become more expensive, it becomes less appealing to take one out in the first place, as we’ve seen already. This situation is a stark contrast to what home buyers faced in the US a year ago.
The effect of the rise in the federal funds rate on demand is two-pronged. On the one hand, the higher mortgage prices are likely to reduce demand for houses directly — but also, rising inflation has increased the cost of living, meaning there’s a lower number of people who can afford a home right now.
People have been talking about the “uncertainty of current times” over the past few years. For a while, it was the pandemic, and then rising inflation and geopolitical tensions came along to cause even more uncertainty.
Buying a property for investment purposes in the US may not seem like such a good idea, thanks to recent changes. Whereas owning a second home was beneficial for tax breaks in the past, this is no longer the case.