Will Rising Mortgage Rates Impact Home Prices?
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.
Look at this graph and see what actually happened:
Recently, in an article titled “Higher Rates Don't Mean Lower House Prices After All,” the Wall Street Journal revealed that in a recent study by John Burns Real Estate Consulting Inc., this was observed:
“[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.
Declining Home Prices
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.
In short, waiting to buy can prove to be costly. In uncertain times, it's vital to have an experienced real estate professional at your side. There is a reason we have been honored with the trust of Silicon Valley families in all market conditions. Skyrise Real Estate Group invites you to learn more about us.
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