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Mortgage Rates on FIRE! Home Prices Up in Smoke?

Mortgage interest rates have already risen by over a quarter of a percentage point in 2018. Many are projecting that rates could increase to 5% by the end of the year.

What impact will rising rates have on house values?

Many quickly jump to the conclusion that an increase in mortgage rates will have a detrimental impact on real estate prices as fewer buyers will be able to qualify for a loan. This seems logical; if there is less demand for housing then prices will drop.

However, in a good economy, rising mortgage rates increase demand as many prospective purchasers immediately jump off the fence to guarantee they get the lower rate.

Let’s look at home prices the last four times mortgage rates increased dramatically.

Mortgage Rates on FIRE! Home Prices Up in Smoke? | MyKCM

In each case, home prices APPRECIATED and did not depreciate. No one is projecting as dramatic an increase in rates as the examples above. Most are projecting an increase of approximately 1% by the end of the year.

The last time mortgage rates increased by 1% over a twelve-month period was January 2013 (3.41%) to January 2014 (4.43%). What happened to house prices during that span? They appreciated by 9.8%.

Just two weeks ago, Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting explained:

“Mortgage rates have risen 1% or more ten times in the last 43 years, with little impact on home sales and prices when the economy was also strong…Historically, rising confidence, solid job growth, and higher wages have more than offset reduced demand for housing resulting from higher mortgage rates.”

Bottom Line

When mortgage rates increase, history has shown that prices appreciate (and do not depreciate) during that same time span.

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Mother Nature reigns supreme in the beautiful mountain town of Blairsville, located in the Appalachian Mountains. Delight in the explosion of autumn leaf color in the mountains or cuddle up in a cozy cabin during the winter. Outdoor lovers can hike endless trails, no matter the season; see breathtaking views atop Brasstown Bald, Georgia’s highest elevation; visit rushing waterfalls and relax on serene Lake Nottely. Enjoy horseback riding, golfing, and antiquing year round or plan your trip around one of many unique festivals. Blairsville's Town Square is frequently the venue for annual events such as the Downtown Spring Arts & Crafts Festival, the Memorial Day Parade, the Green Bean Festival, the Bluegrass Festival, the Sorghum Parade, Hometown Halloween on the Square, and the Christmas Parade. Everyone is invited to these family oriented celebrations! The homes around Blairsville are just as unique and wonderful as its residents. The abundant natural beauty all around acts as inspiration, so that no matter the price range, many quality homes in breathtaking settings are available. Blairsville is the place to be for outdoor fun. Nearly two-thirds of Union County is in the Chattahoochee National Forest. It includes Georgia's highest point, Brasstown Bald (with a visitors' center at the summit), Vogel State Park (the oldest and most popular state park in Georgia), and the Richard Russell Scenic Byway. The school system for Blairsville students, Union County Schools, are now recognized as one of Georgia’s Charter Schools, and has been named an “Outstanding School District” by Standard and Poors. Blairsville is an idyllic mountain town where nature is celebrated and good people are abundant.

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