High Interest Rates and Real Estate: Should You Buy, Sell, or Wait?

If you’re considering moving into the real estate market, you’ve probably been watching mortgage rates climb and wondering whether it’s the right time to buy, sell, or sit tight. With interest rates at their highest levels in decades, the real estate landscape has changed dramatically from the ultra-low-rate environment of the past few years.

How should you respond?

Should you rush to buy before rates rise even higher? Sell while prices remain strong? Or wait until borrowing costs become more affordable?

The answer depends on your financial situation, investment goals, and risk tolerance.

In this article, we’ll explore how high interest rates impact homebuyers, sellers, and investors and help you determine the best strategy in today’s market.

The impact of high interest rates on real estate

Mortgage interest rates are one of the biggest drivers of affordability in the housing market. When rates rise, monthly payments increase, reducing purchasing power for buyers and cooling demand. Here’s how today’s high-interest rate environment is affecting different market participants:

Homebuyers : Higher rates mean higher monthly payments, which can make it more difficult to afford a home. Buyers who could have comfortably afforded a $500,000 home at 3% interest may find themselves priced out at 7%.

Sellers : While home prices remain elevated in many areas, higher rates are making it harder for buyers to qualify for loans, leading to fewer offers and longer time on the market.

Investors : Rising borrowing costs can make it more expensive to finance rental properties, potentially reducing cash flow and making real estate a less attractive investment compared to other options.

Does that mean you should hold off on making a move? Not necessarily. Let’s break it down further.

Should you buy a home now?

Buying a home in a high-interest-rate environment presents challenges, but it isn’t necessarily a bad idea if you approach it strategically.

Reasons to buy now

Less competition : When interest rates were low, bidding wars were the norm, and many buyers had to make offers over the asking price. Fewer buyers are competing for homes today, which could mean better deals and more negotiating power.

Home prices could stay strong : While higher rates have softened some markets, housing prices in many areas remain elevated due to low inventory. If demand stays high and supply remains constrained, waiting for a massive price drop may not pay off.

You can refinance later : If rates drop in the future, you can refinance to secure a lower payment. Buying now means you start building equity sooner rather than waiting and potentially paying more later.

Reasons to wait

Affordability challenges : Affordability is the biggest downside of buying in a high-rate environment. A higher rate means a higher monthly payment, which could stretch your budget uncomfortably.

Possible price corrections : While some markets are holding firm, others are seeing price declines. If home values drop significantly, you might find a better deal by waiting.

Uncertain economic conditions : The broader economy is unpredictable. If a recession hits, home prices and interest rates could decline, making it a better time to buy.

Should you sell your home now?

For sellers, the high-interest-rate environment creates both opportunities and risks.

Reasons to sell now

Home prices are still strong : While demand has cooled compared to the red-hot market of 2021, home prices remain historically high in many areas. Selling now could lock in significant gains.

Less competition from new listings : Many homeowners are reluctant to sell because they don’t want to give up their low mortgage rates. That means less inventory on the market, which could help support your home’s value.

Strong job market supporting buyers : While higher rates dampen demand, the job market remains resilient, and many buyers remain active.

Reasons to wait

Fewer qualified buyers : Higher rates have priced many buyers out of the market. That means fewer offers, longer time on the market, and potentially lower sale prices.

If you plan to buy again, you’ll face higher rates : If you’re selling to buy another home, you’ll likely have to take on a higher-rate mortgage yourself—unless you’re downsizing or paying cash.

Market uncertainty : If the economy slows or rates drop in the next year or two, selling later could yield better results.

Strategies for navigating the current market

If you’re unsure whether to buy, sell, or wait, consider these strategies:

Buy smart : Focus on affordability, not just purchase price. If you plan to refinance later, consider an adjustable-rate mortgage (ARM).

Look for motivated sellers willing to negotiate on price or closing costs.

Sell strategically :  Price your home competitively to attract buyers.

Offer seller concessions, like rate buydowns, to make your home more appealing.
If you’re buying again, consider ways to offset higher mortgage costs, like downsizing.

Invest carefully :  Prioritize cash flow over speculative appreciation. Consider alternative financing, like seller financing, to avoid high-interest loans. Look for undervalued properties with strong rental demand.

Final thoughts

There’s no one-size-fits-all answer to whether you should buy, sell, or wait in today’s high-interest-rate environment. It all depends on your financial situation, goals, and risk tolerance.

The real estate market is cyclical. Today’s high-rate environment won’t last forever. By staying informed and making strategic decisions, you can confidently navigate this market—whether you choose to buy, sell, or wait.

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