Interest Rates vs. Home Prices: What’s Happening?

By Erik Kelly

Erik Kelly has been a top-producing real estate professional since 2002 and a proud Phoenix resident since 1996. His deep community ties and industry reputation have enabled him to build a thriving, referral-based business.

One of the biggest questions I get is, “Where are interest rates right now, and how will they affect my monthly payment?” If you’re wondering the same thing, keep reading because this could save you hundreds of dollars a month and help you make the smartest move in today’s market.

Interest rates have been fairly stable but have seen some ups and downs recently. Right now, conventional loan rates are in the low 7s, while government-backed loans like FHA are in the 6s. But here’s the truth: your rate isn’t just about the market—it’s about YOU. Your credit score, down payment, and loan type all play a role. That’s why it’s crucial to explore every option before making a decision.

Even a 1% difference in interest rates can mean paying hundreds more every month. If you’re buying a home, you need to factor in more than just the mortgage rate. HOA fees, insurance, and property taxes can also impact your total cost.

You might think higher rates would make home prices crash, but that’s not what’s happening. Prices have stabilized because fewer buyers are in the market right now. But here’s the catch—there’s still a massive housing shortage. By 2025, as interest rates drop, more buyers will flood the market, and prices will go up again. Waiting could mean paying more for the same house later.

There’s a little-known strategy called a temporary rate buydown that can help. Here’s how it works: Instead of paying today’s full rate, you buy down your interest rate for the first one to two years. In many cases, sellers will cover this cost as part of negotiations. You start with a lower payment, making homeownership more affordable upfront. If interest rates drop in the future, you can refinance. But if you wait to buy, you’ll face more competition and higher prices.

If you wait for rates to drop, you’re not the only one. Many buyers are on the sidelines, ready to jump in the moment rates fall. That means bidding wars, higher prices, and fewer choices. Right now, you have leverage. You can negotiate a better price, ask for seller concessions, and use a rate buydown to lower your payment.

If you’re thinking about buying, let’s talk. We’ll go over your options, break down the numbers, and find a strategy that makes the most sense for you. Don’t wait until the market heats up, call me at 480-382-6444, or send me an email to clients@erikkellyhomes.com.