Will Increasing Mortgage Rates Impact Home Prices?

Posted by Eric Peterson on Wednesday, December 21st, 2016 at 4:21pm.

Will Increasing Mortgage Rates Impact Home Prices? | Keeping Current Matters

There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.

However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.

Here is a graph showing what actually happened:

Will Increasing Mortgage Rates Impact Home Prices? | Keeping Current Matters

Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All,the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:

“[P]rices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence.”

Last week’s jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.

Bottom Line

We will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed.

Attention Agents: For more on how mortgage rates will impact the housing market going into next year and what opportunities will dominate housing in 2017, please join us this afternoon at 2PM ET for our free webinar: The 3 Major Opportunities That Will Dominate Real Estate in 2017

If your are interested in buying a home or selling your home this year call/text me directly at 512-791-7473 or send me an email at eric@koparealestate.com.

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