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Mortgage Rates on FIRE! Home Prices Up in Smoke?

Mortgage interest rates have already risen by over a quarter of a percentage point in 2018. Many are projecting that rates could increase to 5% by the end of the year.

What impact will rising rates have on house values?

Many quickly jump to the conclusion that an increase in mortgage rates will have a detrimental impact on real estate prices as fewer buyers will be able to qualify for a loan. This seems logical; if there is less demand for housing then prices will drop.

However, in a good economy, rising mortgage rates increase demand as many prospective purchasers immediately jump off the fence to guarantee they get the lower rate.

Let’s look at home prices the last four times mortgage rates increased dramatically.

Mortgage Rates on FIRE! Home Prices Up in Smoke? | MyKCM

In each case, home prices APPRECIATED and did not depreciate. No one is projecting as dramatic an increase in rates as the examples above. Most are projecting an increase of approximately 1% by the end of the year.

The last time mortgage rates increased by 1% over a twelve-month period was January 2013 (3.41%) to January 2014 (4.43%). What happened to house prices during that span? They appreciated by 9.8%.

Just two weeks ago, Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting explained:

“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.”

Bottom Line

When mortgage rates increase, history has shown that prices appreciate (and do not depreciate) during that same time span.

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About Area

Blairsville, Georgia is the county seat of Union County, in the Northeast Georgia mountains, and is the place to be for outdoor fun. Nearly two-thirds of Union County is in the Chattahoochee National Forest. It includes Georgia's highest point, Brasstown Bald (with a visitors' center at the summit), Vogel State Park (the oldest and most popular state park in Georgia), and the Richard Russell Scenic Byway. There are many exciting destinations in and around Blairsville, like Meeks Park, Butternut Creek Golf Course, Lake Nottely, Helton Creek Falls. The county recently completed construction on a multi-million dollar facility at Butternut Creek Golf Course which acts as a pro shop, grill, Chamber of Commerce, and a gorgeous reception area that can be rented for an type of event. It sits above the golf course and offers an incredible view. In 2011, Blairsville was designated as an official Appalachian Trail Community. This designation recognizes Blairsville for its part in promoting awareness of the Appalachian Trail as an important national and local resource. In 2007 Blairsville was recognized as a Georgia Better Hometown, largely due to the community volunteer efforts of the Downtown Development Authority of Blairsville. Blairsville has many dedicated individuals and organizations that work together to make the city a great place to live. Welcome to Blairsville, Georgia!

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