What effect do lower interest rates tend to have on the real estate market?

Lower interest rates typically have a positive impact on the real estate market primarily because they reduce borrowing costs for homebuyers and investors. When interest rates decline, the cost of financing a mortgage decreases, making it more affordable for individuals to purchase homes. This increased affordability can lead to higher demand for housing, driving up home prices and stimulating overall market activity.

Furthermore, lower borrowing costs can encourage developers to invest in new construction projects, as financing these projects becomes less expensive. This, in turn, can help address housing shortages and enhance the growth of the real estate sector. Lower interest rates also make real estate a more attractive investment compared to other asset classes, prompting more capital to flow into the market.

Overall, the effect of lower interest rates on the real estate market is generally characterized by increased demand and activity, contributing to a more buoyant market.