Will Home Prices Drop As Mortgage Interest Rates Rise?


Will Home Prices Drop As Mortgage Interest Rates Rise?
By Scott Rogers • January 28, 2022
Question... Will Home Prices Drop As Mortgage Interest Rates Rise? Short Answer... I don't think so Long Answer... Above you'll find a graph showing the median sales price in Harrisonburg and Rockingham County over the past ten years, shown in blue, and the average mortgage interest rate during the same timeframe, shown in green. A few things to point out... [1] Yes, it is accurate to observe (see the red arrows) that while the median sales price was increasing rather quickly over the past four years, the the average mortgage interest rate was also dropping steadily. Did prices only rise because rates dropped? No, that does not seem likely at all. Did prices continue to rise as much as they did at least partially because rates were so low? Yes, that seems relatively likely. [2] Interest rates rose sharply in June 2013 and December 2016 (see the first two yellow circles) and sales prices did not start declining -- though, those increases in rates were followed by prolonged periods of declining interest rates. [3] Interest rates rose steadily (!) between mid-2017 and early 2019 (see the third yellow circle) and sales prices did not decline. [4] Interest rates started rising, and falling, and rising, and falling through pretty much all of 2021 (see the fourth yellow circle) and prices kept right on climbing. So... as we head into 2022 and as we start to see mortgage interest rates rising... will home prices decline? It seems unlikely that an increase in mortgage interest rates, alone, would cause home prices to decline. Yes, it is true that a buyer's potential mortgage payment will increase with higher interest rates, so that might reduce their buying capabilities - but plenty of home buyers, in this area, these days, seem to be buying below the top of what they could afford to buy -- so slightly higher mortgage payments may not affect them as much as we'd think. That was a lot of thoughts -- about a lot of numbers -- if you have thoughts of your own, feel free to email me as I welcome a variety of opinions and perspectives! Receive Updates by Email Recent Articles: Is There A Price You WOULD Pay For This House? There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 24, 2024 (unless otherwise noted).
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