Are Mortgage Rates Deciding Home Prices? Historically, No.
We know that the rates have been at an all-time low over the summer with people buying homes with a 3.39 interest rate on their mortgage. People who were planning to buy in the summer but hesitated are now kicking themselves in the rear end for not being more decisive. The 30 year fixed rate has gone up to 4.13% as of December 12th, 2016. Now this might seem like the end of the world to some folks but this hike shows confidence in real estate and shows the strength of the pool of buyers and inventory. The actual projections from last year around this time estimated that the rate would be about 4.6% for a 30 year fixed.
Does this mean that because of higher rates there will be fewer buyers? And because of fewer buyers, less demand for homes in the market and therefore prices will come crashing down? NO. Relax. Historically when rates have gone up more than a percent, home value has actually gone up! By the decade, averaging out the mortgage rates, this is the lowest the rates have been, EVER. Yes, it is still a good time to get a mortgage but not necessarily easy to do so. More proof that the market is actually getting stronger and not entering a bubble.