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    Will Home Prices Fall as Mortgage Rates Rise?

    Will Home Prices Fall as Mortgage Rates Rise? Mortgage interest rates have increased by more than half of a point since the...

    • Juan Murray
    • May 31st, 2018
    • 3 min read

    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:

    • 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.

     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.”

    Courtesy of Simplifying the Market

     

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    About the author

    Juan Murray

    (617) 721-0961
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    Juan got his start in the residential real estate market in 1994 and has never looked back. His mission is to provide excellence to his clients, and he is always looking for ways to improve the real estate experience for his clients and colleagues in the industry. Early in his real estate career, he worked as the Housing Rehabilitation Director for a national non-profit organization, Neighborhood Assistance Corporation of America (NACA). His goal was to gain more knowledge of the construction and renovation of existing homes in conjunction with working with 1st-time buyers. He effectively managed over 25 residential construction project managers on the East & West coasts while implementing procedures to improve communication between contractors, property owners, and banking representatives. He also developed resources, designed processes, and organized all aspects of real estate property acquisition and renovation. Juan completed a home inspector licensing course on his way to becoming a licensed home inspector. But after completing 30 inspections as an apprentice observer, after crawling under numerous porches and “crawl spaces,” he decided it wasn’t his cup of tea. Juan has always had a sharp eye for market trends and an innate understanding of what his clients need. That’s why, as a top real estate agent in Boston, he is constantly ahead of the curve, anticipating changes in the market and helping his clients manage their real estate goals. His keen intellect, quick wit, and tireless work ethic make him an invaluable partner for anyone looking to buy or sell property in the Boston area (or via his referral partners worldwide). Although Real Estate is a large part of his life, it is not the only part. He loves hanging out with family and friends, being in the kitchen, enjoying great food, anything Apple or Cole Haan, gadgets, great cigars, F1, motorcycles, photography, and traveling (to name a few). He lives with integrity and tries not to take life too seriously.

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    Juan Real Estate Group

    Juan Real Estate Group

    769 Centre St, Suite 209, Jamaica Plain, MA 02130

    769 Centre St, Suite 209, Jamaica Plain, MA 02130

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    [email protected]

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