Federal Reserve rate hike sparks home price reductions, experts say
Compass’ Bowers Group Vice President Brett Rubin speaks to Fox News Digital about how the Federal Reserve raising rates for the first time in three years could lead to a frozen real estate market.
American homeowners expecting peak-market valuations are confronting a changing real estate landscape following the Federal Reserve’s latest interest rate decision.
Rising borrowing costs are shrinking the pool of qualified buyers, signaling a potential wave of price reductions for sellers seeking to close deals before year-end, real estate insiders told Fox News Digital.
“Sellers have… very high expectations. And it takes a while for sellers’ expectations to come down. And that’s the reality,” DaGrosa Capital Partners founder and chairman Joe DaGrosa told Fox News Digital. “With respect to buyers, I think a lot of people are going to have to wait it out. And wait and see a better situation on the mortgage front… [there’s] going to be some pressure. So I think it’s going to be tough on buyers and it’s going to be tough on sellers.”
“Fewer buyers equals fewer opportunities to sell the home, less competitive environment. And so as a result, we’re seeing a lot of sellers struggling to sell their homes in a market that otherwise would be a pretty strong market,” Bowers Group Vice President at Compass Brett Rubin also said.
“And with that, we’re starting to see homes sitting on the market a little bit longer, a lot more price reductions, hesitant buyers kind of sitting on their sidelines. And so this rate hike definitely has implications on both sides of the spectrum.”
Construction workers build homes in Lillington, North Carolina. (Getty Images)
Federal Reserve policymakers voted 12-0 on Wednesday to raise the target range for the federal funds rate from 3.5%-3.75% to 3.75%-4%. The 25-basis-point increase marked the first interest rate hike since July 2023 and came after the Fed left rates unchanged at its first five meetings this year.
The average rate on a 30-year fixed refinance increased to 7.14% from 6.87% a week earlier, while the average 15-year fixed refinance rate was 6.30% Thursday, according to the Mortgage Research Center.
“The retail market sellers are going to realize that they’ve probably experienced 40%, 50% appreciation of their property values over the past 8 to 10 years… I think they’re going to have to recognize that they’re going to take a little bit of a hit if they want to sell,” DaGrosa said. “And homebuilder sentiment is at its lowest in the past 12 months. It may get worse before it gets better. So you’re seeing a double whammy for homebuilds, which is their cost of building homes has gone up.”
“Some folks who need to sell their homes, they’re full steam ahead as well, and they’re just going to have to weather the storm for better or for worse,” Rubin added. “Ultimately, if they need to reduce the…
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