--- title: How High Interest Rates Will Affect the Housing Market description: Low interest rates for the past 2 years made the housing market very competitive. Higher rates will slow investors, calm bidding wars and give hope to Americans looking to build wealth through homeownership. image: https://blog.artofhomeownership.com/hubfs/pexels-karolina-grabowska-5625108.jpg --- [![Art of Homeownership](https://blog.artofhomeownership.com/hs-fs/hubfs/AOH_LOGO_HORIZONTAL_PRIME-Oct-25-2022-04-55-09-9634-PM.jpg?width=5233&height=1901&name=AOH_LOGO_HORIZONTAL_PRIME-Oct-25-2022-04-55-09-9634-PM.jpg "Art of Homeownership")](https://blog.artofhomeownership.com/) [![logo-black](https://f.hubspotusercontent20.net/hub/4057429/hubfs/Regal_Core_Theme/Logo/logo-black.png?width=50&height=18&name=logo-black.png "logo-black")](https://blog.artofhomeownership.com/) - [Mortgage Professionals](http://www.artofhomeownership.com/mortgagepros) - [Homeowners](http://www.artofhomeownership.com/homeowners) - AoH App - [App Tour](http://www.artofhomeownership.com/app) - [Download App](http://www.artofhomeownership.com/download) - Login - [Homeowners](https://aoh.artofhomeownership.com/pfm/login?returnUrl=%2F) - [Mortgage Professionals](https://learn.artofhomeownership.com/learn) [Homeowners](https://blog.artofhomeownership.com/topic/homeowners) , [Maximizing Wealth Through Real Estate](https://blog.artofhomeownership.com/topic/maximizing-wealth-through-real-estate) , [Home Buying Process](https://blog.artofhomeownership.com/topic/home-buying-process) # How High Interest Rates Will Affect the Housing Market [By Mandy Mortgage](https://blog.artofhomeownership.com/author/mandy-mortgage) April 14, 2022 - - - ### Could Higher Interest Rates Save The Housing Market?   It’s no secret that low interest rates over the past two years have been fueling the fire under the housing market. Low borrowing costs combined with the already low inventory levels have been driving up prices.   But rates are on the rise. The 30-year fixed mortgage rate [topped 4% earlier this month](https://www.freddiemac.com/pmms?intcmp=CWS-HP) for the first time since 2019.   While these higher rates will affect affordability for all who are looking to invest in real estate, they may actually be a good thing for home prices and the housing market in general.   ### High Rates May Discourage Investors According to a [recent report](https://www.redfin.com/news/investor-home-purchases-q4-2021/#:~:text=Real%20estate%20investors%20bought%20a,that%20purchases%20residential%20real%20estate) by Redfin, real estate investors bought a record 18.4% of the homes that were sold in the U.S. during the fourth quarter of 2021 – a 5.8% increase from the year before.   ![](https://ithomeloans.com/wp-content/uploads/2022/04/homes-bought-by-investors.jpg)   Redfin defines an investor as any institution or business that purchases residential real estate. They can be large corporations, local companies, or wealthy individuals. These investors are taking advantage of intense demand for rentals and increasing prices, lining their pockets with the high monthly rental payments they can command (up [14%](https://www.redfin.com/news/redfin-rental-report-december-2021/) in December). According to Redfin economist Sheharyar Bokhari,   > **“While record-high home prices are problematic for individual homebuyers, they’re one reason why investor demand is stronger than ever.** > > **Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy. The supply shortage is also an advantage for landlords, as many people who can’t find a home to buy are forced to rent instead. Plus, investors who ‘flip’ homes see potential to turn a big profit as home prices soar.”** The historic shortage of homes for sale has been pushing prices higher and resulting in multiple bids on many homes. This has given a huge advantage to investors who can afford to offer cash.   According to the Redfin report, just over 75% of investor home purchases were paid for with all cash in the fourth quarter of last year. This has been putting even more upward pressure on prices and resulting in a market where it is nearly impossible for the average homebuyer to get their home offer accepted.   ### An Incentive For Sellers In addition to the supply that is being snatched up by investors with big wallets, [existing home listings have been decreasing](https://neohomeloans.com/12/23/2021/active-listings-of-homes-for-sale-hit-all-time-low/) year after year.   More American homeowners are deciding they want to stay where they are. Whether that’s due to new teleworking availability, lingering fears of COVID, or simply the inability to find a new home because of the short supply.   Also, as we’ve said many times before, [homeowner equity is at an all-time high](https://neohomeloans.com/02/11/2022/home-seller-profits-soared-last-year-is-it-time-to-sell-your-home/). Real estate is an asset that many Americans just aren’t ready to gamble with right now. It’s hard to give up an investment that is providing you with 15-30% annual returns just by paying your mortgage on time!   ### Are The Tides Changing? If interest rates climb enough, demand could be reduced enough to slow down the out-of-control appreciation levels.   The investors who flooded the market thanks to the desirable returns may now be able to find better returns in other markets and release their stranglehold on real estate. It could also make those homeowners who have been stubbornly sitting on their mountains of equity more willing to make a move.   ### The Bottom Line The lack of housing supply that leads to increased home prices and brutal bidding wars has been crushing the dreams of Americans who want to build wealth through homeownership for a long time.   Higher interest rates, while affecting home affordability for all, may be just what is needed to discourage investors, reduce biddings wars, and slow equity gains so more homeowners are willing to sell.   If you have been sitting on the sidelines waiting for a better time to enter the housing market, it might be time to start preparing. Reach out to one of our [Art of Homeownership Professionals](https://www.artofhomeownership.com/find-an-aoh-professional) today to help you find your dream house! [All posts](https://blog.artofhomeownership.com) ###### About Author [Mandy Mortgage](https://blog.artofhomeownership.com/author/mandy-mortgage) ##### You might also like ![What a Recession Would Mean for the Housing Market](https://blog.artofhomeownership.com/hubfs/pexels-karolina-grabowska-5717791-1.jpg) [What a Recession Would Mean for the Housing Market](https://blog.artofhomeownership.com/what-a-recession-would-mean-for-the-housing-market) April 14, 2022 ![Co-Signing A Mortgage Loan: What Both Parties Need To Know](https://blog.artofhomeownership.com/hubfs/pexels-ketut-subiyanto-4246202.jpg) [Co-Signing A Mortgage Loan: What Both Parties Need To Know](https://blog.artofhomeownership.com/co-signing-a-mortgage-loan-what-both-parties-need-to-know) April 14, 2022 ![What does Comp mean in Real Estate?](https://blog.artofhomeownership.com/hubfs/pexels-david-mcbee-1546168-1.jpg) [What does Comp mean in Real Estate?](https://blog.artofhomeownership.com/what-does-comp-mean-in-real-estate) April 14, 2022 ##### SUBMIT YOUR COMMENT #### Subscribe Subscribe to our newsletter & stay updated [![AOH_LOGO_PRIME_COLOR-May-18-2022-03-14-19-58-PM](https://blog.artofhomeownership.com/hs-fs/hubfs/AOH_LOGO_PRIME_COLOR-May-18-2022-03-14-19-58-PM.png?width=69&height=100&name=AOH_LOGO_PRIME_COLOR-May-18-2022-03-14-19-58-PM.png "AOH_LOGO_PRIME_COLOR-May-18-2022-03-14-19-58-PM")](https://blog.artofhomeownership.com/) 23509 Via Farol, Valencia CA 91355 ##### About - [Our Story](http://www.artofhomeownership.com/story) - [Help Center](https://support.artofhomeownership.com/knowledge) - [Contact Us](https://artofhomeownership-7924977.hs-sites.com/discovery-call-cta) ##### Partners - [Partner Portal](https://learn.artofhomeownership.com/learn/signin) ##### Terms & Agreements - [Terms of Service](https://web.artofhomeownership.com/terms-of-service) - [Privacy Policy](http://www.artofhomeownership.com/privacy-policy) Copyright 2021. 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