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  • Writer's pictureSheryl Lyons


We're experiencing an exciting moment in the Housing Market in which we get to see firsthand how much mortgage interest rates drive Housing Demand. Understanding the key drivers of Housing Demand is critically important not only within the Real Estate Industry but across multiple industries; Finance, Construction Trades & Materials, and the list goes on.

We've seen that "lower than normal" mortgage interest rates definitely spur Housing Demand. We saw that between 2002 to 2006 when unscrupulous lenders offered low rates via adjustable rate mortgages right before the Housing Market crash. We saw it in 2012 as a way to jumpstart rebuilding the Housing Market. And we saw it again in early 2020 as a response to COVID. We haven't seen how Housing Demand reacts to "higher than normal" mortgage interest rates. We know it will slow the market down, but the question is, by how much?

As a real estate broker, I'm aware of how much Housing Demand is projected for the next five to ten years, and I can tell you that we need more Housing Supply to support the projected demand. There is a base level of Housing Demand that will remain regardless of the current "higher than normal" mortgage rates. Right now, we get to witness how much of that Housing Demand is affected. We also get to see creative solutions to work around the, hopefully, temporary issue of higher rates in the form of rate buy-downs, etc.

I'm not surprised by the growth in Housing Demand during 2020 & 2021, but I believe the lack of Housing Supply limited the Housing Demand, creating an automatic STOP to the demand growth.

I'm curious to witness the STOP of the "higher than normal" mortgage rates. How much will Housing Demand be squashed before the rates return to the approximate 4% range? As mentioned in the video, I'm surprised at how limited the decline has been given the amount of rate increase. I would expect to see continued decreases for at least the remainder of the year, that is, if mortgage interest rates are a key driver of Housing Demand.

This will be an interesting trend to watch!

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