The Connection Between Interest Rates and Housing Prices
I have seen a number of articles recently about the impact of rising mortgage rates on housing prices. Since January, the average interest rate on a 30 year loan has risen dramatically , from 3.41% to 4.37% on a 30 year mortgage, according to Freddie Mac. There have been a few articles suggesting the housing market recovery will be derailed by rising interest rates, which effectively increase the cost of buying a house. However, the chart below which compares mortgage interest rates versus prices, does not support the premise that an inverse relationship exists. Reading the chart, one would come the conclusion that housing prices are much more impacted by the state of the economy and markets than interest rates. (Hat tip: Calculated Risk)
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