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I don't think so because where are those sellers than going to move? Inventory is extremely low and if those sellers sold their house to buy another one, it seems like it would cancel out those houses that just entered the market because now there's even more sellers entering the market. So demand (and therefore prices) would stay very high. The only way I could see it help is if people sold and then rented instead of buying another house.
The relationship between lower mortgage rates and real estate prices is complex and doesn't always follow a straightforward path.
For example, WHY are interest rates lower? Is it because the FED lowered the rate back to zero because of a severe recession and high unemployment?
Normally, history can be a guide, but The Federal Reserve eliminated reserve requirements for all depository institutions on March 26, 2020 specifically to discourage the banks from foreclosing on properties to avoid a repeat of the great recession. The COVID emergency is over, but they never reimplemented a reserve requirement. Therefore, if another severe recession hits, it may not affect housing inventory. They might even re-implement bans on evictions.
Without knowing why the interest rates are lower, it's impossible to know what the effect on RE prices are going to be. The Unknowns might even constrict supply and drive prices up.
The answer to the question is in the slopes of the supply and demand curves. Are they elastic? Are they inelastic?
The entire field of econometrics exists to determine such things.
Quote:
Originally Posted by dontaskwhy
When I went to college in the late 1980's we simply called it ECONOMICS.
Econometrics is a quantitative subset of economics where you generate hypotheses, build mathematical models, collect data, and use statistical methods to test your hypotheses with the models and data.
I answered "econometrics" to the poster who claimed the topic of the thread is impossible to predict. I assert it is possible using econometrics.
Seems counter intuitive, I know. Traditional thinking would tell you that lower mortgage rates gives buyers more spending power, bringing more buyers to the market, and driving up prices. But what about all the people with 3% mortgages who would like to upgrade to a larger house, but the thought of paying 8% interest on a more expensive house keeps them put? Would a significant drop in rates, say down to 4.25% or so, cause a wave of houses flooding the market as people look to upgrade?
It would cause a flood of buyers into the market (increased demand) and likely push prices up. Higher rates will lower demand and eventually push prices down.
Most buyers determine affordability by what they can pay towards a mortgage each month. Homes are actually more affordable for mortgagees with high price/lower rates (2/3/4%). Inversely, higher rates (6+%)/lower prices are less affordable to most buyers.
Possibly, but that's only if it remains relatively "affordable" to build new houses at lower rates so that supply increases to meet demand. But decreased rates and accompanying mass buying/selling/refinancing could have a high inflationary effect, too, which means fewer new homes being built while prices continue to increase for existing home sales. The only thing that tamed housing price increases here on Oahu (and much of the rest of the country) were higher interest rates.
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Does the Low Mortgage Rate Affects the Price
