Mortgage Rates & Home Prices
Since the beginning of 2018, mortgage interest rates have risen by more than 1/2 of one point, and indications are that rates will increase by an additional half of a point by December. Because of the increase in rates, there are speculations that home prices will fall. However, industry experts are doubtful that home prices will be negatively impacted by the increase in rates.
First American Chief Economist Mark Fleming opines, "Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage [Interest] 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 home-ownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage interest rates are on the rise because of a stronger economy and our housing market is well positioned to adapt."
Industry Reports are also predicting substantial appreciation in home prices this year:
- The Home Price Expectation Survey reports this year home prices will appreciate by 5.8%.
- The Freddie Mac Outlook Report says predictions are for home prices to appreciate by 7% this year.
- The Core Logic HPI Forecast reports a 5.2% increase year-over-year on home prices.
As reported earlier this year in Freddie Mac's Insight Report, "Nowhere to go but up? How increasing rates could affect housing."
"As mortgage rates increase, the demand for housing will likely continue to be strong relative to the constrained supply of inventory and continue to put upward pressure on home prices."
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Disclaimer:The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. John Sabia PA and Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. John Sabia PA and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.