The Impact of Increasing Mortgage Rates on Prices

blue interest ratesMany pundits are warning that there will be a drop in real estate values because mortgage rates are beginning to increase. The logic makes sense. However, history shows that increasing rates have not negatively impacted home values in the past.

 

Four times over the last 30 years mortgage interest rates have dramatically increased. Here is the impact the increases had on home values at the time:

Dates

Mortgage Rate

Home Values

May ‘83 - July ‘84

12.63 – 14.67

+ 6.6%

March - Oct ‘87

9.04 – 11.26

+ 5.2%

Oct ’93 - Dec ‘94

6.83 – 9.2

+ 1.2%

April ’99 -May 2000

6.92 – 8.52

+ 10.9%

Perhaps the impact of increasing rates on future home prices won’t be as dramatic as some are predicting.