Real Estate – Who are rates impacting most?
Who is being impacted most by the rise of interest rates?
There is no demographic of buyer that has been more affected by the national rate hikes than this group. It is unfortunate “collateral damage” to a large group of young-adults that are being all but forced into renting for the foreseeable future.
On the seller-side of things, these rate hikes have brought down their values. However, the reduced prices are not enough to off-set the monthly costs for young buyers. To compound this, many sellers of this product-type purchased during a lower rate environment. Leading them them to a “hold” position as they do not want to take a loss on sale. These seller’s monthly payments, even if they overpaid on purchase, are being covered by current rent values. We are seeing more 1 bedrooms (that would historically have been up for sale to take advantage of value-appreciation + capital gains exemption) be converted to rentals.
There is a good chance the above leads to higher rents in 2024. The backlog of would-be buyers waiting for rates to come down may start opting for a higher-quality apartment than a condo purchase. Leading to increased demand for rentals, pushing prices up.