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Real Estate prices have been generally going up since about 1980. There have been ups and downs, but if you look at the Case Shiller Historical charts, you can see the general direction has been higher and higher prices. Summer 2018, prices were the highest ever.
So it seems like there's a very strong correlation between rates and price for the last 20 years.
Projected 30 year fixed rates are projected to go up to about 7% in 2022. That will be about the same rate as in 1998. That higher than rates for the last 20 years.
So if it's not just a 40 years long coincidence that rates generally falling for almost 40 years has led to prices generally rising for almost 40 year, we should see significant price reductions for the next 5 years.
there is little correlation until rates get very high .
our best home appreciation has been in the 5-6% mortgage ranges .
in order to have rates at that level the economy has to be humming like a baby .
housing was booming in 2007 with 6-7% mortgages . on the other hand prices were sluggish in the 3-4% range .
2007 was when the housing scam was in effect around the time the housing bubble burst, so it's not a good example.
The good thing about rising rates is that it keeps the housing market from going artificially high and having another collapse, but you do too much higher and it's going to hurt buyers and sellers.
like i said above , in 1987 i was happy to get 8-1/4% .... we originally had 7-7/8% but a snafu at closing had us lose that rate .
more important then rates are local economies and markets . this country consists of 1500 mini economies and we all experience different things .
until 2008 we had rolling recessions that went through different parts of the country leaving others just fine .
so while mortgage rates tend to influence how much house you buy , until they get pretty high they tend to be a smaller factor . if anything rising rates tend to spur buying as the old we better buy now before we can afford less house kicks in .
many areas are experiencing a quality of supply issue . much of the nice stuff is gone and buyers are not just taking anything .
my son put his home in scarsdale ny up for sale . within 2 hours of listing people were coming over .
there was a bidding war and the house sold in 2 days .
my son had to go out and find another house . the supply was crappy . he caught a home the day it listed and bought it the same day
2007 is no different then most of our history , rates were in the 5-7% range and that is where the greatest appreciation has happened historically .
even so not every mortgage in 2007 was a scam and 5-7% is pretty average.
back in the late 1980's when we bought our first investment property real estate was booming here . we were happy to get 8-1/4% ...
Yes 2007 was very different than any other history which is why the housing bubble collapse happened.
It's not just about mortgage rates, it's about housing prices too and the housing market
and in 2007 they were artificially inflated because anyone and everyone was getting approved for homes that they could not afford and a home worth $150K was being sold for $250K or more to many who could not afford to pay the mortgage.
bottom line is there is little link between rates and values until they get pretty high . it is going to be local economy and market dependent more than anything else . many areas are slowing because of lack of decent supply not buyers .
buyers won't pay top dollar for houses they don't like .
there can be 50 homes for sale but the only one that counts is the one my wife likes .
So if it's not just a 40 years long coincidence that rates generally falling for almost 40 years has led to prices generally rising for almost 40 year, we should see significant price reductions for the next 5 years.
Are you intentionally disregarding the effect of inflation on prices over 40 years? The prices of most everything have been coincidentally rising for 40 years. Should we expect prices of other things to drop as mortgage rates go up?
2007 was when the housing scam was in effect around the time the housing bubble burst, so it's not a good example.
The good thing about rising rates is that it keeps the housing market from going artificially high and having another collapse, but you do too much higher and it's going to hurt buyers and sellers.
Yeah, I do see that the bubble bursting years going against my general observations. But you have the same thoughts I did when looking at the chart. Prices fell while rates fell, because what put prices very high in the few prior years, was from people getting loans on stated income, loans with zero interest options and all other sorts of questionable or illegal activity.
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