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value changes during increased interest rates

Home price changes during periods of rising mortgage interest rates

I expressed in an earlier post that mortgage interest rates are projected to rise over 1% by the end of 2015. This means that the average mortgage interest rate will increase from 4% to 5%. This concerns some people as they feel that with rising mortgage rates that homes prices may decline. I have attached a couple graphs that really help explain why the experts expect for interest rates to increase and home prices to also increase in the upcoming five years.

The biggest thing that is happening during a period of rising interest rates is that the overall economy is getting stronger. This means more people in the US are employed and getting raises. The federal reserve increases interest rates to tame inflation during these great economic times. These are strong periods of economic growth that follow periods of recession or stagnant periods in economy, which the United stated experienced over the last 7 years.

The first graph shows four periods in history when mortgage interest rates increased rapidly and also shows the corresponding increase in home values at the same time. The second graph shows that the experts predict increased home sales across the nation in 2015. This volume of sales in greater than 2013 & 2014 which were great recovery years in the housing market. The final graph indicates how much experts predict home prices to increase across the nation between 2015 and 2019. Out of 100 experts that were surveyed the average expected home appreciation over the next five years is predicted to be 23.5%. If you like to look at things from a pessimistic view they you should note that even the biggest bears, the most negative experts surveyed, expect the prices to increase 15.1% over this same five year period. If you own a home in Las Vegas, Summerlin, Henderson, or North Las Vegas that is valued at $250,000 today you should expect the value at the end of 2019 to be approximately $309,000 based on the experts average forecasted appreciation rate.  If you are looking to buy a home or trade up to a larger home than don’t wait to long as prices and interest rates will both be going up in the coming years.

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Las Vegas area and national real estate market update – December 2014


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