What Another Expected Interest Rate Hike Means For The Housing Market

To say the housing market has been on the fritz lately would be an understatement. According to CBS News, the Federal Reserve has issued a statement regarding home interest rates, stating they are set to rise by another 0.75%, bringing interest rates somewhere between 3.75% and 4%. This is the fourth time the Fed has raised rates by 0.75% this year as they attempt to curb inflation. Essentially, for each 0.25 percentage-point increase, Americans are paying $25 more in interest per year on a $10,000 loan, so homeowners should expect to pay an additional $75 on a $10,000 debt after today.

Between rising mortgage rates and sky-high housing costs, many people have put off purchasing homes, says Realtor. Mortgage rates rose earlier this year to a whopping 7%, which has put a major strain on the housing market. For many buyers, their annual income has yet to rise to match the increased rates, so they're being denied a mortgage. Because of this, the Fed continues raising interest rates to keep up with the highest inflation increase in 40 years.

Many people wonder what the future holds for the housing market going into 2023, hoping home costs and interest rates will start to go down. Unfortunately, the predictions are mixed as to whether the housing market is going to see any positive changes in the near future, Norada explains. Zillow conducted a study analyzing 897 regional housing markets to predict how many will experience a decrease in housing prices in the new year. Six hundred and seven of those markets are expected to see price increases, while 19 are projected to remain the same, and 271 are projected to decline.

Fortunately, this year's gargantuan interest rate hike should be the last we see for a while, NPR states. However, until inflation decreases, we shouldn't expect to see a drop in interest rates anytime soon. In the upcoming year, rates will likely remain high until inflation comes back down to the target of 2%, according to Greg McBride, chief financial analyst at Bankrate (via NPR).