Summit County real estate agents predict how the rise in interest rates will impact local homebuying market

Earlier this month, the Federal Reserve announced a quarter-point interest rate hike in an effort to combat the highest inflation rate seen since the 1970s.

The move is intended to balance out the economy, and as the Fed implements measures like this, some Summit County real estate agents are preparing for the affects these hikes will cause in the real estate market.

Most are in agreement: The types of buyers to feel the impacts of this interest rate hike first will likely be first-time homebuyers and local buyers.

Jeannette Thompson, a real estate agent with Frisco-based Gongloff Group, said last year was the firm’s best year in sales, and she doesn’t imagine it was different for most firms. Sure enough, Coldwell Banker Mountain Properties agent Annie Markuson and Omni Real Estate agent Philip Mervis said the same thing.

Last year was a record-breaking year for the real estate industry. Though all of these agents said year-over-year growth in sales would likely slow, they didn’t necessarily believe that new interest rates would halt second-home owners from buying properties in Summit County — at least not right away.

“I do feel like there will still be growth in the value of homes, and there are still a lot of eager buyers out there – a small handful which are local – that still haven’t found that dream home,” Markuson said.

Mervis said that it is hard to predict what will come from the added interest rates. He said the industry is currently in “uncharted waters” considering the foreign conflicts overseas and that communities are still rebounding from the pandemic. Despite the uncertainty, he guessed that second homeowners and investors, who have the means to lay down a “healthy down payment,” might be less impacted by these rate increases than Summit County’s local population.

“With the confluence of potentially higher property taxes — property prices are still likely to increase, even if the amount of that percentage is lower this year — and then the higher monthly mortgage payments due to rising interest rates, these all point to higher costs for the local buyer,” Mervis said. “However, I don’t think we’ve been seeing the same growth rate in local incomes that folks get from local employment. They are certainly not matching increases.”

Markuson worries about how the local population will be impacted by these hikes, too. She noted that Summit County isn’t always an easy community to carve out a life long term and that housing has long been a struggle, especially in the last year. She said these rate increases won’t make things easier.

“We just really need to keep our local workforce in mind because without a local workforce, we have no community,” Markuson said.

Thompson noted that although local buyers will be impacted immediately, these types of buyers still make up a smaller portion of the overall buyer pool. A vast majority of Summit County’s real estate is bought by second-home owners or investors.

Thompson said these interest rate increases are taking effect during the county’s transitional season and that this time of year is usually when sales start to slow. At the end of May is when they start to pick up again, and it’s then that Thompson said buyers looking to purchase a second home might pause or think twice about whether or not they want to pay more for a property. Thompson estimated that about 40% of sales in the county are paid for by cash with the remaining 60% of sales are bought using some kind of loan.

“Right now – just simply because it’s changed, transitioned – any kind of shock gets our second-home owners to start thinking, start wondering, ‘What are we going to do,’” she said.

Even so, Thompson said there will be some who choose not to buy within the county. When that happens, Thompson guessed that those looking to buy from within the county will have the luxury of taking their time and weighing their options – something that wasn’t always available to buyers during last year’s hot market.

In general, she said those that have money to purchase a home will not be too impacted by these hikes.

“The reality is — and I always say this and it doesn’t sound good — but people who have money have money,” she said. “They did in the recession in ‘08, they still had it, they were still buying, they still paid tons of money to come up here and ski and then they went back home. It’s hard to say at what point they’ll crack and say it’s not a good investment.”