What Does the Fed’s Interest Rate Hike Mean for Real Estate Investors?

As it has been indicating it would do for months, the Federal Reserve last week increased interest rates for the first time in nearly a decade. The good news is that the interest rate increase means the Fed believes the economy is strong and historically low rates are no longer necessary to stimulate growth. But while this one increase is not likely to have much of an impact on the housing market, the Fed has indicated it will continue to increase rates – and that
will likely have effects that real estate investors should pay attention to.

The Federal Reserve’s interest rate hike will lead to an increase in mortgage rates. And as rate increases continue, mortgage rates will continue to rise. As mortgage rates increase, many homebuyers will have less buying power and will have to reduce the amount they are willing to spend on a home. So if you’re a house flipper, keep in mind that home prices might retrench in the coming months.

However, higher interest rates could have the opposite impact on rents. People who were considering buying a home might decide to continue renting since mortgages are more expensive. On the flip side, if you are in a variable rate mortgage you’re going to see an increase in mortgage rates that might eat up some of your income. If you’re in a fixed rate mortgage, you could be in a very strong position as your mortgage stays consistent but rents could increase.

Of course, mortgage rates are only one of many factors that are expected to have an impact on the real estate market in 2022. The number of foreclosures is increasing as federal and state Covid regulations are expiring. Inflation is extremely high. And more people than ever working from home is having its own impact on the market.

All in all, it is still too early to tell exactly how this will all play out. But there’s no doubt that real estate investors should pay close attention to the Fed’s actions and plan accordingly. With more than 30 years of experience in the real estate market, Rock East Funding can help you navigate these waters, whether rates go up or down. We are committed to providing our clients with the best possible service, no matter what happens in the mortgage market. Contact us today to learn more about how we can assist you!

About the Author
Patrick Vertucci has been involved in the mortgage and real estate industries since 2002. He has been a licensed mortgage loan originator in 14 states and has flipped upwards of 180 properties. Patrick now holds the position of VP of Business Development for Rock East Funding. With his experience in the
lending sectors, Patrick is able to provide valuable insight to clients looking for creative financing solutions.