01/06/2022
With the rise of interest rates inevitable, does that mean a drop in housing prices is also inevitable?
No.
"...studies indicate there may be some correlation between interest rates and housing prices, but most of that correlation is in regards to low rates causing high prices and there is VERY LITTLE TO SUGGEST higher rates cause lower prices.
Logically, you would think high rates would cause lower prices because the rates make such a huge difference in payments, but that does not seem to be the case."
Why is this?
Rates are only one factor the effect home prices!
What are the other factors?
Housing supply: How many houses are currently for sale compared to the demand for housing
Economy: Do people have jobs and money to pay for housing?
Lending guidelines: Are the current loans based on solid financials or pipe dreams?
Population changes: Is the population increasing or decreasing?
New construction: Are enough new houses being built for demand?
Prices and affordability: Are prices too high for most people to buy?
Conclusion:
If you are waiting for the housing bubble to burst, you may be waiting a while.
I have been hearing repeatedly how housing prices will crash when interest rates go up. But is that what the data says? I think a lot of people assume that