Will Rising Rates Affect Home Values?

Posted by Cindy Allen on Thursday, March 1st, 2018 at 6:21am

Keller, Southlake and Trophy Club homes for sale
Mortgage interest rates have risen over a quarter of a point in just the first two months of 2018,  and Freddie Mac's US Economic and Housing Market Outlook is projecting a steady increase of interest rates throughout the year,  Many suggest rates could reach 5% by the end of the year. Now those of us who have been around a while recognize 5% interest rates are still a "gift", having seen rates much higher in the past.  Several of us who were in the market in the mid to late 1980's even remember 12-14% rates.  Still each increase, especially when combined with increasing housing prices, bodes poorly for homebuyers sitting on the fence.

What impact will rising rates have on home values?

Just as in years past, I'm starting to hear some potential home buyers justify their fence sitting position by saying increasing rates will have a negative effect on housing prices in Keller, Southlake, and Trophy Club.  Their logic is that as rates rise fewer buyers will be able to qualify for a home loan.  And that does make sense; if there is less demand home prices should decline.  

But what these fence sitting home buyers aren't factoring in is the good economy.  Rising mortgage rates typically bring out more prospective home purchasers who want to lock in the lower rates.  

“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.

Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting


History shows when mortgage interest rates dramatically increased home prices appreciated too.  Now most are not expecting quite the same steep increase in rates this year as in the chart above.  Most experts are suggesting an increase of just 1% by years end. That would be in line with the 1% increase mortgage rates climbed in 2013, going from 3.41% to 4.43%.  And I think we can all agree housing prices only went up in 2013.  The national average home price increase, similar to the Dallas-Ft. Worth area, was 9.8%.

Bottom Line

If you're at all considering a move, perhaps it's time we meet.  I'd be happy to sit down with you and help you calculate payments, discuss closing costs and show you what it may take for you to lock in a home at today's interest rates.  And there won't be any pressure, just an opportunity to see if now is the right time for you to make a change.  Just give me a call and let's get started.

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