Media-driven hysteria: The relationship between home buying demand and interest rates

Buying a home is NOT just a transaction but a strategic goal for consumers. That strategic goal is to provide a home to raise a family, build on the promise of generational wealth, access better education for the member’s children, or provide recreational opportunities for the family. With the fundamental objective in mind, I’ll explore how the home buying demand-interest rate relationship is primarily media-driven and fails to consider the broader economic context in which higher rates present consumers.

The prevailing narrative in the media suggests that as interest rates rise, home buying demand decreases, and vice versa. Unfortunately, many credit union employees also buy into this media hysteria. In strategic planning sessions, I often hear executives say, we need to adjust our mortgage growth goals due to the economic climate, feeling like victims to a threat they cannot control. This kind of groupthink overlooks the cyclicality of interest rates and the opportunities this environment presents for homeowners. I’ll diagnose the realities of the hysteria and emphasize the opportunity a higher interest rate environment presents.

Media-driven hysteria

Media outlets sensationalize the impact of interest rates on the real estate market. When interest rates rise even slightly, headlines proclaim that the housing market is headed for a crash, sending potential homebuyers into a frenzy. Conversely, when rates drop, they suggest now is the best time to buy a home. The real story is more nuanced.


continue reading »