The Impact of Interest Rates on Montgomery County TX Real Estate

Becca Ellis
Apr 8
3 min read

Interest rates play a pivotal role in shaping the real estate market, influencing both affordability and demand. In Montgomery County, Texas, recent trends in mortgage rates and housing market dynamics highlight how these factors intersect to affect buyers, sellers, and investors.

Current Interest Rate Trends

As of April 2025, mortgage interest rates remain elevated, with 30-year fixed-rate mortgages averaging 6.70% and 15-year fixed rates at 5.96%[6]. While these rates are lower than the highs seen in early 2025 when they surpassed 7%, they are still significantly higher than the historic lows of 2-3% recorded during the pandemic years[1][3]. This sustained increase has made borrowing more expensive, impacting monthly payments and overall affordability for homebuyers.

Economic uncertainty, inflationary pressures, and bond market movements continue to influence mortgage rates. Experts predict that rates will likely stay within the range of 6.5% to 7% throughout April[2]. Although the Federal Reserve has paused its benchmark rate hikes after cutting rates in late 2024, mortgage rates have not substantially decreased due to other economic factors[3].

Montgomery County Housing Market Overview

The real estate market in Montgomery County has shown resilience despite higher interest rates. In March 2025, the median home price was $360,044, a year-over-year increase of 4.4%[4]. However, this growth has been accompanied by a shift from a seller's market to a buyer's market. Homes are staying on the market longer, with an average listing age of 63 days—up by 4.3% compared to last year[4].

Inventory levels have also risen significantly. The number of homes for sale increased by 23.5% from February to March 2025, offering buyers more options[4]. This uptick in inventory reflects a cooling demand as higher interest rates deter some potential buyers.

How Interest Rates Affect Buyers and Sellers

For Buyers:

Higher interest rates translate into larger monthly mortgage payments. For instance:

- Borrowing $320,000 at a rate of 6.76% results in a monthly principal-and-interest payment of $2,078.

- At an 8% rate for the same loan amount, the payment rises to $2,348—a difference of $270 per month[3].

This reduced affordability has kept many buyers on the sidelines or shifted their focus toward smaller or more affordable homes. In Montgomery County, demand for smaller "starter homes" has increased as buyers seek cost-effective options[5].

For Sellers:

Sellers face challenges in attracting buyers willing to pay premium prices. Approximately 65% of homes sold in Montgomery County last month went below asking price[4]. Additionally, homes priced higher tend to stay on the market longer, requiring sellers to adjust expectations or offer incentives.

Long-Term Implications

Despite current challenges, Montgomery County’s housing market remains resilient over time:

- Historically, home prices have proven resistant to rising interest rates due to life events like marriage or job changes that prompt purchases regardless of rate cycles[3].

- Suburban areas like Montgomery County continue to attract buyers seeking larger spaces and affordability compared to urban centers like Houston[5].

If mortgage rates eventually decline closer to the mid-6% range or lower, affordability may improve. However, this could lead to increased demand and exacerbate inventory shortages—a common issue in many U.S. housing markets[3].

Conclusion

Interest rates are undeniably shaping Montgomery County's real estate landscape in 2025. Elevated borrowing costs have cooled demand but also created opportunities for buyers in a transitioning market. Sellers must adapt to changing conditions by pricing competitively and understanding buyer preferences.

Whether you're buying or selling in Montgomery County, staying informed about interest rate trends and local market conditions is essential for making strategic decisions in this dynamic environment.