Rising mortgage rates have clearly defined the 2022 housing market. With interest rates rising due to the Federal Reserve's Response to inflation- it has undoubtedly reduced housing affordability. But, because the rate increase had occurred during a highly competitive market with very little inventory and record high home prices, this has been the silver lining of the housing market as a whole. Rising rates have tampered with demand to a point where we are starting to see what is a normal market. 

Although interest rates have an impact on overall affordability, there are a few unexpected benefits to a cooling market:

Decrease in Home Prices

During the two years of low-interest rates, there were far too many buyers competing for a historically low inventory of homes for sale. In such a crazy market, you had probably heard that multiple offers exceeding the asking price were the norm. Supply and demand were out of control. 

However, rising interest rates are assisting in resolving that issue. Increases in interest rates price some buyers out of the market, which benefits the buyers who remain; and they typically have the effect of putting downward pressure on housing prices, which benefits buyers.

More housing options are available

While rising interest rates continue to drive buyers out of the market because they can no longer afford the higher monthly payments, something else is happening. More inventory is on the way to the market. Rising interest rates and an increase in available housing inventory mean that qualified home buyers have more options.

Homes are staying on the market for longer in the housing market. Inventory is rising as more listings enter the market and current listings spend longer "days on market." This is good news for buyers.

Buyer Risk is Reduced

During the past two years of buyer competition for a limited supply of homes, many buyers waived offer contingencies. Why? Because offers with fewer conditions have a better chance of being accepted by the seller.

However, among the contingencies waived were two critical ones: the inspection and the appraisal.

An inspection can identify potential problems in the sale of your building and recommend preventive measures that may save you money on future costly repairs.

The market over the past two years consisted of bidding wars that drove prices above the seller's asking price, resulting in homes not being appraised at offer price, which was a huge problem for borrowers because lenders often require a value assessment by an independent licensed appraiser to ensure the home is worth the amount of money they agree to finance when securing a mortgage.

Inspection and appraisal contingencies are reappearing as the market levels off. 

​As the market shifts and demand slows we are starting to see a decrease in growth in home prices, less competition, an increase in supply, return of contingencies, and sellers’ willingness to help with the closing cost which is beneficial for those who are currently searching for a home.

Some buyers may be tempted to postpone their purchase until interest rates fall or home price growth slows. However, if you wait for mortgage rates to fall into a specific range, you risk: 

• Not getting the home you want. 

• Being priced out of listings that you could have previously purchased 

• Waiting for lower rates that may never come

An increase in mortgage interest rates doesn't have to prevent you from becoming a homeowner. It has less to do with the market and more to do with your finances and whether you're willing to accept slightly higher monthly mortgage payments. While it's always nice to get a better rate and a lower total monthly payment, if you can afford the home, there's never a bad time to buy.