How do interest rates influence property values in appraisals?

Higher interest rates typically lower property values because they increase the cost of borrowing for prospective buyers. When interest rates rise, the monthly mortgage payments become more expensive, making it more difficult for buyers to afford homes. This decrease in affordability can reduce the overall demand for properties, leading to a downward pressure on property values.

Additionally, as financing becomes less attractive due to higher interest costs, fewer buyers are willing or able to enter the market. This lack of demand can result in lower sale prices and, consequently, diminished property values. In essence, the relationship between interest rates and property values is a reflection of how much purchasing power buyers have in the market; when borrowing becomes more costly, property values tend to decrease as a direct response to reduced buyer enthusiasm and activity.