Did you know that the Federal Reserve has raised interest rates three times in a row? In fact, the most recent increase was from zero to seventy-five percent, which is quite a bit higher given the previous two increases. After all, the Federal Reserve is attempting to control consumer demand, not just for houses, but also for cars, furniture, and groceries, because demand is out of control. Inflation is currently at 8%. It may rise. However, it is currently holding at 8%. And boosting interest rates is the only way to control inflation and rising consumer demand. So let us see what effect it will have on the property market. It’s certain. Just a few days ago, the current interest rate was as high as 662 percent. There has been a 6% increase in the last few months. That has been the highest in the last 14 years. So it will definitely have an impact on housing sales. We all know that housing prices are very high. Add to that, a higher interest rate. So what does that do to housing sales? Well, according to the National Association of Realtors, for the last seven months consecutively, the number of home sales has gone down every month. And I’m sure the higher interest rates have a lot to do with it. Of course, there’s a shortage of inventory, which has everything to do with it. And of course, buyers are fed up with higher prices, so they’re just hitting the brakes. They say, “I’m just going to wait. I’m not going to go with the multiple bids. They’re just taking a pause.” So the combination of buyer fatigue of multiple offers, total seller control, high-interest rates, and low inventory has caused the number of sales to be down. In fact, according to the National Association of Realtors, last year’s 2021 home sales were approximately six million homes sold, and the projection for 2022 was about 5.4 million homes. That’s almost 6000 less. However, after rates rose significantly for the third time in a row last week, that figure may have dropped. Let’s see what happens at the end of the year. So hopefully you’ll come and watch me again. As I mentioned earlier, inflation is out of control, consumer demand is out of control, and prices are out of control. So Jerome Powell, from the Federal Reserve, is obviously trying to control this consumer demand, higher prices, and the housing market. So what is he trying to do? According to the quote, Jerome Powell is trying to reset the housing market. There was a big imbalance between supply and demand, so let me read a quote from Jerome. Housing prices were going up at an unsustainably fast level. The deceleration in housing prices that we are seeing should help bring prices more closely in line with rents and other housing market fundamentals. We have already seen the impact of high-interest rates on housing sales. According to the National Association of Realtors, which I mentioned earlier, the number of home sales is down by 19% because of the high prices. Let me give you a short story on the impact of interest rates on purchases from consumers.We all know that when rates go up, affordability goes down. So fewer people can afford it, and fewer people can qualify, so fewer people can buy the house. So let’s look at the reverse. And then I’ll come back to the impact of the high-interest rate. I sold a home back in 2021 to a client of mine. They were looking for a house in the $800,000 range. The rate at that time was about four, five to 4.75% interest rate.So the payment on an $800,000 house with a 20% downpayment at that time at 4.75% was $41,667 per month. We kept on looking for homes, but could not find them. It got beaten out by multiple offers. Yes, at that time, there were 10, 15, and 20 multiple offers in the first two days. So we took a month off, and lo and behold, in the meantime, the interest rate dropped to 2.5% towards the end of 2021. So, after speaking with my client and retargeting the lender, we discovered that the same client who could afford $800,000 at about 4.75% on a house for 800 to 850 now could afford to buy a house up to 1.1 at 2.5 percent. So guess what we did? We made an offer in November of 2021 on a house that was about a million dollars, or a little bit more than a million dollars. My buyers were lucky enough with multiple offers to get that house for 1.1%. And guess what? Their payment was on that house at 2.5%. The payment was 455.22 at two 5%20% down on one house.So the same buyer who was buying a house for $800,000, about $4200 a month, bought a house for 1.1 because the mortgage payment only went up by $300 to $400. So that’s how powerful low-interest rates are. So let’s look at how powerful they are. With the higher interest rates, they are even more powerful. And I’ll give you another example. So let’s look at the reverse impact, which is what happens when the rates go up. Let’s take an average home, a medium home price. Nationally, as of quarter two, 2022, is around $440,000. So, for example, if we buy a $440,000 house with a 10% down payment and a 3% interest rate, the monthly payment is $2,300. This is the principal and interest. Let’s pretend, or let’s say the interest rate is 6%. Well, as of today, it is 6% for a $440,000 house with a 10% down payment. Same house, same down payment, but the interest rate is 6%, so the payment jumps to $3004. That’s almost $700 more in payment for the same house. So in one or two or three months, your payment can be as high as $700 a month. Now, let’s take the scenario. And I was talking to a lender, a title officer, and an escrow officer. I actually played golf with them to learn more about real estate. And what they’re saying is that the rate will still go up. Generally, to control inflation, the rate may have to match the inflation rate or have to match the interest rate. So in this case, if the interest rate, let’s say, is 8% and inflation is at 8%, that may be a good match to bring it down. So let’s assume that for calculation purposes we use 7.5% instead of 8%. because my calculator does not have an 8%interest rate right now, only 7% and 5%. So, for the same $440,000 house with 10% down, the payment principal as interest, principal, and interest jumps to three, $400 per month. So at 3%, that house was $2,300 a month. At seven and a half percent, it’s $3,400 a month, almost $1,000 more for the same house. As a result, the high-interest rate eliminates affordability, removing many buyers from the market and slowing demand. So a high-interest rate will do its job. The next few months are critical. They will reduce the payments, and the number of sales, and I’m assuming it will slow the economy next few months are critical.Let’s see what happens. Of course, the number of homes is going to drop significantly. Even with the high inflation rate and the higher interest rate, Fannie Mae, Freddie Mac, MBA, and CoreLogic predict that house prices will level off or remain stable. But they’re not going to drop drastically.