in this study is the sheer number of real estate listings that are directly targeting Airbnb investors rather than typical home buyers. Almost 6% of all listings we found in the Orlando metro directly mentioned the potential of the property as an Airbnb investment, and other metros such as Nashville and Riverside, CA were nearly as high. Listings like these that are aiming for investors, and not for families, further reduces the available pool of properties for typical home buyers, squeezing the supply side of the supply-and-demand equation.” Interest Rates Another major factor in the home- affordability formula is loan interest rates, which have also risen sharply in recent years. In 2020, the average interest rate for a 30-year mortgage hovered around 3%. In 2023, borrowers were faced with an average 6.81% interest rate. For a home priced at $350,000, that’s a difference of over $800 per month, which can make or break homeownership for many. Beyond the monthly payment, the higher interest rate means paying $291,000 more in interest over the life of the loan, and a total cost of $822,265 instead of $531,221 at the 3% rate. To date, the current 30-year fixed mortgage rate is around 7.34%. It’s easy to see why the combination of quickly escalating home prices paired with elevated loan interest rates is leaving many potential buyers playing the waiting game instead of diving into real estate investments. Of course, the fluctuation in interest rates is a tool to control the market. During the COVID-19 pandemic, the low interest rates helped spur sales during a time when many people were affected by unemployment or reduced incomes. Fast forward a few years and the higher rates effectively slowed a rabid housing market. We asked Trent about his take on how the events of the pandemic impacted the trajectory of the commercial and residential house-price/inflation
trend and he said, “During the pandemic years, prices actually rose rapidly in every metro we evaluated due to extremely low mortgage rates. Home price growth has slowed in 2023 and 2024 due to the rise in interest rates. In other words, mortgage rates had far more to do with home prices than the pandemic.” Impact of the NAR Agreement The real estate world is still reeling from the changes spurred by the NAR agreement earlier this year. To date, the question still looms as to how it will affect home pricing and the ability of home buyers to get into the market. Trent had some insight on the topic, saying, “In an upcoming study, we polled one thousand American adults and several hundred real estate agents in separate groups to find out their views on the NAR agreement. The consensus from both groups seems to be that prices will largely remain unaffected, with commission costs simply shifting around. My sense is that any reduction in overall commissions will be matched by a slight rise in home prices, as the real limiting factor is the amount that people can afford, not where the commission goes.”
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