Most real estate agents assume that good economic news will help the real estate market. In some respects, it will, as buyers become more confident in the economy and their job security and move from the side lines and actively look at buying property. One significant impact that an improving economy will have,however, especially when the Federal Reserve decides that they no longer need to keep interest rates low to stimulate the economy, is that mortgage interest rates are bound to increase. As interest rates increase, the ability of buyers to qualify for mortgages and to afford the increased payments will inevitably lead to a slow down in purchases as well as pressure on the sales prices of homes.
This paradoxically is the “catch 22” of an improving economy.
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