JOHNSON CITY, Tenn. (WJHL) – The Federal Reserve hiked interest rates again, but what does that mean for a housing market in the Tri-Cities that has seen rising prices and short supply?
The Fed raised its short-term rate by .75 percent bringing the rate to a range of 3-3.25 percent.
Property Executives realtor Courtney Jackson, representing the Northeast Tennessee Association of Realtors (NETAR), said the rate hike could make home-buying more expensive.
“A buyer in June that could’ve bought a $200,000 house, the rates increased almost a total percent,” Jackson said. “So they need to talk to their lender again. They may not be able to buy that $200,000 house.”
The local housing market has boomed over the last year.
Don Fenley, a market analysis expert for NETAR, said it could slow the fast pace of the Tri-Cities housing market.
“Everybody’s just sort of at the mercy at what the rest of the economy’s going to do,” Fenley said. “Some will sit and wait. Some won’t. Right now, our sales have softened a little bit, but prices haven’t yet.”
Fenley said the Fed raised rates to get inflation under control.
“The housing industry is clearly in the crosshairs of the Fed’s effort to control inflation,” Fenley said. “Increasing the rates has and will continue to have a big effect on affordability.”
He said raising the rate could trigger a recession, but he said they might find that more favorable long-term than continued inflation. He added lenders have probably already taken this latest rate hike into account.
Jackson said recently that while prices have remained high, demand has stayed the same. It’s still high, but it has led to a dip in sales locally.
“We’re seeing sales decline just a little bit, but just barely,” Jackson said. “Homes are staying on the market for about 45 days.”
Fewer sales could bring the area closer to having a balanced market. But there’s still a long way to go as homes are still in short supply.
“It’s a balanced market when we get to six months of inventory. Right now we have one month, almost a month and a half,” Jackson said. “We’re still a very hot seller’s market even though things are starting to plateau.”
While it is still a seller’s market, Fenley said buyers are starting to gain some ground.
“In August, a little over 300 of the closings the sellers actually negotiated down their price a little bit,” Fenley said.
If you’re looking to buy, Jackson suggested being proactive with your lender.
“Call your lender. Get your pre-approval letter updated every week or two weeks,” Jackson said.
Jackson said the pre-approval letter is important because rate hikes can drastically change home prices.
Fenley said he expects another rate hike before the end of the year.