By Pauleen Le

MINNEAPOLIS (WCCO) — Higher interest rates are making some perspective buyers shift their focus in a hot housing market. The Federal Reserve raised rates by 0.5% percent Wednesday, bringing it to a 10-year high.

For borrowers, that means they’re paying nearly $400 more a month on a $300,000 mortgage than they were a year ago.

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Even with the bump, experts still said it’s still a good time to borrow money. Historically speaking, the bump is still pretty low compared to the double-digit interest rates in the 80s or even in 2010.

Real estate experts said demand for housing remains high, but the supply is low so the housing market is still hot despite the increase in interest rates.

Even so, some perspective buyers said the increase is making them think twice.

“If prices went down a little bit and interest rates kind of plateaued and didn’t continue to increase, I would definitely be open to looking again,” said Larissa Kisch, a perspective home buyer.”

Experts said the interest rates are expected to go up even further this year, which could help cool things off.

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Real estate agent Danny Truong, with DT Realty Group Coldwell Banker, said buyers are still looking, but some have switched their focus from single-family homes to townhomes or condos because their price point has changed with the rise in interest rates.

Truong said it might still make sense to buy if you can afford it.

“It’s just a matter of supply and demand right now,” Truong said. “Increase of rental prices are going up, so it’s forcing people to go out and search and if they can, buy a home [and] build equity because renting is 100% interest.”

Truong offered some tips for perspective home buyers still looking. He said increasing the earnest money could help show sellers you’re serious about buying.

Sellers also want to know how much your offer is a guarantee, so Truong suggests adding an appraisal gap just in case the home you want to buy appraises for less than what you offer.

While waiving inspections is attractive to sellers, Truong doesn’t advise it, but he said there are ways to get around it including making inspections non-contingent if properties have an HOA review period. That way buyers can schedule an inspection during the review period and pull their offer without losing any of their money if the inspection reveals any serious issues.

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Truong also said a lot of buyers are now bringing inspector with them to showings. While they can’t give a full inspection report at showings, they’re able to offer just to do a quick glance over.

Pauleen Le