INDIANAPOLIS — The cost of borrowing money is going up again.
As expected, on Wednesday, the Federal Reserve approved another interest rate hike of .75% for the fourth straight time. The is to reduce inflation and it’s having a big effect on the housing market.
Earlier this year, homes were only staying on the market for a couple of days before selling, not they are staying on the market longer. One economist from Ball State University says the increases are helping inflation.
"We're beginning to see inflation slow substantially month to month,” Mike Hicks, an economics professor from Ball State University said. “But it still is higher than it was more than a year ago. So, if it comes back down or stays static for another six to eight months, we should see much better inflation numbers. Core inflation is more at the two percent and overall inflation is more at the four percent range. “
Here is what the latest rate increase means. An average car buyer would pay about $1,000 in extra interest due to the rising rates, while a $300,000 home could cost you $200,000 more in interest.
While this may seem like a negative one realtor says for people in the market for a house could benefit.
"It's really kind of a good thing for buyers,” Lorie Blythe, a local realtor said. “Although the interest rates are higher the buyers actually have a chance to see the house more than once sometimes and they don't have to make a decision within the first 30 minutes."
Blythe says the interest rate hikes have made the real estate market slow down. Now, she finds herself explaining that interest rates can change in the future and it's something her buyers can take advantage of.
"Although the interest rates are higher than they were a few months ago we are still in an all-time you know low for over 20 years so it's really just balancing out,” Blythe said.
That balancing act is something consumers should be aware of when it comes to taking on new debt.
"This is a really good time for households to slow their spending,” Hicks said. “If you have a lot of accumulated debt this is the time to pay it off. Give yourself a Christmas present so that you don't have large credit card debt in January or February."
Realtors say rising interest rates are also lowering the prices of homes. They say prices are closer to what properties are worth. But buyers are looking for cheaper homes to offset the increase in interest.
Hicks added that people should be aware that gas prices aren’t tied to inflation. He says the high prices are largely the way they are because of the war in Ukraine.
As inflation slows, he says it’s important to remember that some goods like food and restaurant entertainment won’t go down. However, he added wages will increase making things easier for people feeling the effects of inflation.
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