Are Home Prices Expected to Drop as Rates Rise?

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Real Estate Agent with Intero Real Estate Services, San Jose, Silicon Valley 01505493
https://activerain.com/droplet/5cz2

 

Another 'What's the Crystal Ball say?' question! Industry experts have somewhat conflicting answers.

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 FlemingFirst 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 LoebsFounder 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 GoodmanCodirector 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:

·         The Home Price Expectation Survey says that prices will appreciate by 5.8% this year.

·         The Freddie Mac Outlook Report is looking for home prices to appreciate by around 7% in 2018.

·         The CoreLogic HPI Forecast indicates that home prices will increase by 5.2% on a year-over-year basis.

So What's the 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.”

Posted by

Lisa Wiseman

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Rainmaker
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Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Good day 

Thank you for sharing your information with us

Have a great day.

Jun 01, 2018 03:46 PM #1
Rainmaker
81,522
Lisa Wiseman
Intero Real Estate Services, San Jose, Silicon Valley - San Jose, CA

You're welcome Anthony. Have a great weekend!

Jun 01, 2018 03:58 PM #2
Rainmaker
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William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I see the values stablize  with the rise in interest raes.

Jun 01, 2018 08:50 PM #3
Rainmaker
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Lisa Wiseman
Intero Real Estate Services, San Jose, Silicon Valley - San Jose, CA

That would make sense, William Feela. However much in our market here in Silicon Valley seems to defy odds.

Jun 02, 2018 11:19 AM #4
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Lisa Wiseman

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