Potential homebuyers who are hoping rising mortgage rates may slow the fast-rise of home prices may be disappointed
Potential homebuyers who are hoping rising mortgage rates may slow the fast-rise of home prices may be disappointed.
That’s according to the latest analysis from First American Financial which says that even in the unlikely event that rates for a 30-year FRM doubled to near 9%, there would still be a sizeable increase in prices.
“Under our hypothetical scenario where mortgage rates double over the next year, our analysis indicates that nominal house price growth would increase above 7% as the spring home-buying market heats up, and slow down to 5.8% by the beginning of 2019,” said First American’s chief economist Mark Fleming. “So, even in the highly unlikely scenario where mortgage rates double over the next year, house price appreciation will not be considerably impacted.”
Fleming was commenting following the release of the title insurer and real estate risk solutions firm’s Real House Price Index which tracks prices alongside buyers’ buying power, based on changes in income and interest rates.
“As we look ahead, it’s reasonable to expect borrowing costs to increase as mortgage rates rise, in turn reducing consumer house-buying power, which reduces affordability. The good news is that, even in the unlikely case that mortgage rates rise faster than expected, our housing market is well positioned to adapt,” said Fleming.