Will Home Prices Fall as Mortgage Rates Rise?



Mortgage interest rates have increased by more than half of a point since the beginning of the year. They are projected to increase by an additional half of a point by year’s end. Because of this increase in rates, some are guessing that home prices will depreciate.
However, some prominent experts in the housing industry doubt that home values will be negatively impacted by the rise in rates.

Mark Fleming, First American’s Chief Economist:
“Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage rates into perspective – they are unlikely to materially impact the housing market… The driving force behind the increase are healthy economic conditions…The healthy economy encourages more homeownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage rates are on the rise because of a stronger economy and our housing market is well positioned to adapt.”

Terry Loebs, Founder of Pulsenomics:
“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices. These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers.”

Laurie Goodman, Codirector of the Housing Finance Policy Center at the Urban Institute:
“Higher interest rates are generally positive for home prices, despite decreasing affordability…There were only three periods of prolonged higher rates in 1994, 2000, and the ‘taper tantrum’ in 2013. In each period, home price appreciation was robust.”
Industry reports are also calling for substantial home price appreciation this year. Here are three examples:


Bottom Line

As Freddie Mac reported earlier this year in their Insights Report, Nowhere to go but up? How increasing mortgage rates could affect housing, “As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

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BeTrue Real Estate helps people Buy & Sell Homes all over San DiegoLa JollaCarmel Valley, and surrounding San Diego areas. We believe in Being True to Yourselves, Your Dreams, Values & Home. With their Multi-Cultural Background, over 35 years of combined experience selling Real Estate, and licensure in New Jersey, New York and California, Rahul, Smitha and the BeTrue Real Estate team can offer global reach. Read our Glowing Reviews here.

If you are interested in Homes, Townhomes, Condominiums in the San Diego area, please Contact Us at 858-263-6773 or 973-615-6504.

Moving Up to Your Dream Home? Don't Wait!



Mortgage interest rates have risen by more than half of a point since the beginning of the year, and many assume that if mortgage rates rise, home values will fall. History, however, has shown this not to be true.

Where are home values today compared to the beginning of the year?


While rates have been rising, so have home values. Here are the most recent monthly price increases reported in the Home Price Insights Report from CoreLogic:
  • January: Prices were up 0.5% over the month before.
  • February: Prices were up 1% over the month before.
  • March: Prices were up 1.4% over the month before.

Not only did prices continue to appreciate, the level of appreciation accelerated over the first quarter. CoreLogic believes that home prices will increase by 5.2% over the next twelve months.
How can prices rise while mortgage rates increase?

Freddie Mac explained in a recent Insight Report:
“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

Bottom Line

If you are thinking about moving up to your dream home, waiting until later this year and hoping for prices to fall may not be a good strategy.

________________________________________

BeTrue Real Estate helps people Buy & Sell Homes all over San DiegoLa JollaCarmel Valley, and surrounding San Diego areas. We believe in Being True to Yourselves, Your Dreams, Values & Home. With their Multi-Cultural Background, over 35 years of combined experience selling Real Estate, and licensure in New Jersey, New York and California, Rahul, Smitha and the BeTrue Real Estate team can offer global reach. Read our Glowing Reviews here.

If you are interested in Homes, Townhomes, Condominiums in the San Diego area, please Contact Us at 858-263-6773 or 973-615-6504.

DID YOU KNOW? Existing-home sales ran at a 4.94 million seasonally-adjusted annual rate in January

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