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Robert Shiller was quoted as saying: “There is not a tight fit at all between the two: high mortgage rates do not translate automatically into low home prices” – and then, he backed it up with this chart, here:
As you can see, even despite interest rates being increased…and, subsequently lowered…home prices continued to move higher…almost as though it ignored every conventional piece of advice that it SHOULD make a difference. As for WHY this happens, it was explained that increasing mortgage rates USUALLY occur due to improving economic conditions or rising inflation expectations….as a result, OTHER factors in the economy that generally accompany those rising interest rates usually prevent prices from crashing down.
Another study also seconds this, while confirming that “it’s hard to see any correlation for rising rates causing lower prices” – HOWEVER – it DOES appear that this is a FACTOR to price affordability, in addition to: Housing supply, The Economy, Lending guidelines, Population changes, New construction, and Home affordability.
NEW MORTGAGE OPTIONS
Beginning NOW – Fannie Mae and Freddie Mac INCREASED their loan sizes by 18%, resulting in a maximum loan of $1 MILLION DOLLARS throughout over 100 high cost of living areas. On the one hand, this gives buyers more room to purchase a home in these current conditions…and given how quickly prices have been rising, the new loan limits would simply “BUMP UP” to match where the market is selling.
But, on the other hand…”some housing experts say the expected jump in loan limits raises questions about the appropriate role of the government in housing… and whether taxpayers should effectively backstop sky-high housing prices, when Fannie and Freddie’s market share is already rising.”
It’s common that RENTAL PRICES tend to lag HOUSING VALUES by as much as several years, since – when you sign a lease – you typically lock yourself into a scheduled price, during which – your rent stays the same. However, 1 to 2 years LATER – once that term is up – the landlord is free to raise rents, sometimes to market value, which is why we don’t often see rent increases until much, much later…or, in this case, TODAY.
For renters…if you’re worried about prices increasing…NOW would be a good time to negotiate with your landlord to lock in a longer lease term, or – consider seeing other options in the area to make sure you’re getting a fair price. Ultimately, the burden is going to fall on you to make sure you’re not getting ripped off…so, a little research absolutely goes a long way.
If you’re looking to buy a home – do your best to shop around, make yourself as strong of a buyer as possible, lock in a 30-year mortgage at the lowest rate you can find, and then…be patient.
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For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/