In a recent article posted by a national news network, a writer explains that interest rates have more than doubled since 2020, and that this was a large contributing factor to one of the most unaffordable housing markets in history. While the first part of this statement is true, and interest rates have doubled since 2020, higher interest rates are not what led to the unprecedented housing prices that we see today. In fact, it’s the opposite.

The Early Pandemic Boom: A Double-Edged Sword

Back in 2020, as interest rates hit historic lows, buyers were thrilled. Lower rates meant more purchasing power, enabling many to afford larger homes while keeping monthly payments manageable. On the surface, it seemed like an incredible opportunity. However, what most buyers didn’t realize was that these artificially low interest rates would spark unprecedented demand in the housing market.

The flood of buyers, combined with limited housing supply, led to bidding wars and intense competition. First-time buyers, hoping to seize the moment, often found themselves priced out of the market by investors from far away—many paying in cash. Home prices skyrocketed, with some markets seeing a staggering 15% increase in value in just one year (2020). This trend continued in 2021 and 2022, with similar double-digit price growth.

While buyers thought lower rates made homes more affordable, they didn’t account for the rapid price escalation. A home that was worth $200,000 in 2020 could easily rise to over $250,000 within two years. In essence, lower interest rates made housing more expensive due to surging demand.

Today’s Market: Lessons from the Past

What does this mean for today’s market? If history teaches us anything, it's that government intervention to lower interest rates rarely makes housing more affordable in the long run. Instead, it creates a buying frenzy that pushes home prices higher.

Over the next 6-12 months, if interest rates continue to drop, we could see demand rise again. As rates inch closer to 5%, investors may flood the market, driving prices up once more. So, buyers should not assume that lower rates equate to lower prices.

What Should Buyers Do?

If you’re looking to buy a home in the next 6-12 months, here are two key pieces of advice:

Don’t Let Interest Rates Dictate Your Decision

The best time to buy a home is when it aligns with your personal and financial timeline, not when interest rates are low. Waiting for the "perfect" rate could cost you in rising home prices. For example, buyers who hesitated in 2020 due to high competition saw prices increase by 25% in some markets. Similarly, those who waited in 2022 saw price hikes of 12-15% within a year or two, despite slightly higher rates.

You can't control interest rates, but you can control your budget. Work closely with a real estate agent and a trusted mortgage officer to determine a monthly payment that works for you. And remember, if rates drop after you’ve bought your home, refinancing is always an option.

Be Patient in Your Home Search

Buying a home is a process, often taking 2-3 months or longer. Finding the right property requires patience and careful consideration. Beyond just price and size, you’ll want to factor in the neighborhood, school districts, proximity to parks, restaurants, and shopping. Don’t rely solely on online listings—pictures can be deceiving. A home that looks great in photos might feel small in person, while a property with fewer pictures might be a hidden gem.

Collaborate with a knowledgeable real estate agent who can help you navigate the complexities of the market and find the best home for your needs.

Final Thoughts

While lower interest rates may sound appealing, they often bring higher home prices and increased competition. Instead of focusing solely on rates, make a home-buying decision based on your unique circumstances, and don’t rush the process. With the right strategy and support, you can successfully navigate the housing market, regardless of where
interest rates land.

About Me

Sam Wurm

Executive Vice President of Nebraska Realty and Embarc Realty

402-570-8002 | sam.wurm@nebraskarealty.com

As Executive Vice President of Nebraska Realty and Embarc Realty, my team and I are focused on driving creative growth and innovation in the real estate industry. We are committed to delivering consistent results to buyers, sellers, builders, and developers, and I'm excited to be a part of a team that emphasizes forward- thinking. Outside of work, I enjoy traveling and exploring new restaurants with my wife, Abby, and spending time with family and friends. My Christian faith is an important part of my life, and I'm grateful for the incredible support system that surrounds me every day.