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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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About Area

Blairsville is a small mountain community in the Northeast Georgia Mountains. Almost two thirds of Union County, in which Blairsville is located, is inside the Chattahoochee National Forest. Therefore, Mother Nature reigns supreme in the area. Outdoor activities of all types are celebrated. Visitors can find themselves hiking, mountain biking, horseback riding, or even exploring three rushing waterfalls including the twin cascades at Helton Creek Falls. In addition, there are warm weather water sports on pristine Lake Winfield Scott and Lake Nottely, and the 20-acre lake and swimming beach at one of Georgia’s most beloved summer getaways, Vogel State Park. Many different picturesque settings are available for real estate, like mountain views, rolling pastures, creeks, rivers, and many combinations of them all. The pace of living invites you to just sit in the porch swing and listen to nature around you. Blairsville is also host to many unique and fun festivals all throughout the year. The Historic 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! If you’ve ever wanted to experience mountain living at it’s best, Blairsville is for you, and Century 21 Scenic Realty is the Agency you need.

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