Business & Investment

Impact of rising mortgage rates on home sales and home prices

Along Calculated risk of 4/04/2021 09:36:00 AM

CR Note: This article by Matthew Graham of Mortgage News Daily has a lot of information (and charts). Who is lying about the housing market?.. Here are some excerpts about the impact of mortgage rates on home sales and home prices.

Click the graph to see the enlarged image.

Inventory status can mean that prices remain more resilient in the current housing cycle, despite the recent surge in interest rates. Still, past examples of interest rate spikes have had only moderate impact on housing.

Use the same home sales data as above to highlight previous rate spikes and see the impact …

There was a big rate surge at the end of 2016, but there was no noticeable impact on prices. This is noteworthy. That’s because the surge in interest rates was driven by economic optimism, in contrast to the 2013 surge in interest rates that occurred after the Fed said it would start reducing interest-rate-friendly bond-buying programs. 2018 was a bit similar as the Fed continued to tighten monetary policy and raise short-term interest rates.

The current surge in interest rates may share some similarities with 2016. The 10-year Treasury yield (benchmark of long-term interest rates such as mortgages) pathways largely track pandemic developments and expectations of economic recovery. Yields (also known as rates) began to rise late last summer as vaccine trials showed promising results and economic data began to improve.

House priceConclusion, It is an environment of increase rate until notification is given later. If there is no negative change in the economy, interest rates will eventually lose momentum for other reasons. However, it can take some time, and the overall rate spike can rival the worst cases of the past by the time the course is fully completed.

CR Note: paper.. As Graham points out, inventory is key.

Impact of rising mortgage rates on home sales and home prices Impact of rising mortgage rates on home sales and home prices

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