What Happens To Home Sales If Mortgage Rates Rise?
Interest rates reflect the cost of money nationwide –- but real estate values are established locally.
If you look at the question in general terms, higher interest rates mean larger monthly payments, high monthly payments mean a smaller pool of buyers, so in theory home prices should remain steady, rise less or even decline.
But –- and here’s the catch – there’s more to home pricing than interest rates. For example, suppose rates rise and, at the same time, the job base increase in your community? Or new home construction declines while the local population grows?
No less important, homes sell even when rates are far higher than today. In fact, in 1981 the prime rate hit 20.5 percent. That same year, according to the National Association of Realtors, home prices rose 6.8 percent and 2,419,000 existing homes were sold, evidence that high interest rates do not necessarily result in lower home values or an end to home sales.
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Syndicated originally by Content That Works and posted with permission.
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