One of the questions I get the most right now is what impact will rising mortgage interest rates have on home prices. The reason I get asked this question a lot is that mortgage rates have increased by more than a half a point since the first of the year. Mortgage rates are also projected to increase by about an additional half of a point by the end of the year. Now, as mortgage interest rates continue to climb, some people are starting to get a little concerned that home prices will depreciate.
However, if you look at what the industry experts are saying, it is doubtful that home values will be negatively affected by the increase in mortgage rates. As Terry Loebs, the founder of Pulsenomics put it: "Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for US home prices. These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers."
Now, the way I see it, as mortgage interest rates rise, the demand for homes from buyers will likely remain strong relative to the housing shortage which will continue to put pressure on home prices to increase.