What role do interest rates play in real estate markets?

Interest rates are a critical factor in real estate markets because they significantly influence the affordability of mortgages and financing options for buyers. When interest rates are low, borrowing costs decrease, making it easier for individuals to secure loans for purchasing homes. This increased access to affordable financing can boost demand in the housing market as more buyers are able to afford homes. Conversely, high interest rates can lead to higher monthly mortgage payments, reducing buyers’ purchasing power and potentially slowing down the market.

The other options do not accurately convey the impact of interest rates on real estate. Interest rates do have a significant effect on how much buyers can afford and their willingness to enter the market, which ultimately affects property values and market dynamics.