Will Home Prices Fall When Mortgage Rates Rise?
Its inevitable that we may see mortgage rates raise a couple of percentage points over the next 2 or 3 years, and some commenters suggested that home prices would fall after mortgage interested rates rise.
Bill Conerly, a Forbes contributor, states "Home prices, however, are not likely to fall after interest rates rise."
Here’s why some believe home prices might be thought to fall, Conerly states. "A house is a long-lived asset. The value of any such asset (real estate, stock share, or bond) is the sum of the future stream of cash flow or benefits, discounted by the interest rate. With higher interest rates, the discounting reduces the present value of those future income (or psychic benefit) streams.
A simpler way to think of it is that at higher interest rates, fewer people can qualify for mortgages to buy a home; even if they qualify, they may not want to make higher payments."
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Bill Conerly, a Forbes contributor, states "Home prices, however, are not likely to fall after interest rates rise."
Here’s why some believe home prices might be thought to fall, Conerly states. "A house is a long-lived asset. The value of any such asset (real estate, stock share, or bond) is the sum of the future stream of cash flow or benefits, discounted by the interest rate. With higher interest rates, the discounting reduces the present value of those future income (or psychic benefit) streams.
A simpler way to think of it is that at higher interest rates, fewer people can qualify for mortgages to buy a home; even if they qualify, they may not want to make higher payments."
Read more.....
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