GRAND RAPIDS, Mich — Last week, the Federal Reserve raised its key interest rate by three-quarters of a point in an effort to curb inflation.
Now, there is speculation the competitive housing market from the past year may slow down.
However, in West Michigan, do not expect to see that slowdown any time soon.
"We still have demand despite the fact that rates are going up," said Julie Rietburg, CEO of the Greater Regional Alliance of Realtors (GRAR), " A 5%, 6% or 7% rate is still considered a great rate on a house. We've been spoiled for too long, quite frankly."
Rietburg said it's the low inventory of houses available in West Michigan preventing prices from plummeting.
A lot of speculation has been comparing now to the 2008 housing market crash, she said. However, in 2008, there was inflated pricing on plenty of homes available. Now, it is real demand driving up the cost.
"The two worlds and the two issues are totally, totally different," said Rietburg, "We really don't expect this to hit the housing industry."
However, what the rising interest rates could do is decrease the price of a home a buyer can afford. This is because the interest rates will affect their monthly payment, possibly pushing some homes formerly in their budget, out.
"It doesn't impact their desire to buy," said Rietburg, "It just might mean instead of that four bedroom-two bath home, they're going to get a three bedroom-bath-and-a-half. Because it's based on affordability, and what they can afford on as a monthly payment."
Other realtors agree not to expect a decline in home values anytime soon. However, there may be a reduction in competition for homes.
"Those who are not able to compete on price will be forced to remain renting or remain in their existing home," said Brooke Oosterman, with Housing Next. "Just hindering their ability to kind of pick and choose, and determine what housing choice is right for them."
Rietburg said rent may also soon increase, as landlords see their property value grow.
According to GRAR, the average price of a house sale in May 2021 was $311,238. In May of 2022, that average is $366,526. That is an increase of nearly 18%.
Also in Kent County, there were 861 new listings in May 2021. In May of 2022, there were 901, a slight increase.
"Where we want to be is four to five months of inventory," said Rietburg, "And we're averaging two to three weeks right now."
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