We all know housing is in a great bull market and is still going strong. The big question is whether this bull run can last in a world with surging mortgage rates and "hyperinflation", both of which are directly impacting the housing market. Here is some good information that can answer the question whether high mortgage rates can kill the booming real estate market. Enjoy it!
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Many must be wondering if the recent surge in mortgage rates will put the brakes on rising real estate prices. After all, conventional wisdom often cites that rising rates means falling real estate prices.
But it also cites that rising inflation is good for real estate prices…
Now, we have both forces at work.
So which affects real estate more, inflation or rising rates?
History tells us it's inflation, and that when it comes to real estate prices, rate fluctuations are simply market noise.
Take a look at this chart of median home prices (blue line) and mortgage rates (red line) from 1971 to 2021…
The last time we saw this level of inflation and rates rising this fast was in the 1970s. Back then, home prices were undeterred.
From 1971-1981, when rates more than doubled from around 7% to 16.5%, real estate prices rose 175%.
Over this 50-year period, there were 19 years where mortgage rates went up, yet home prices still rose 8% on average.
Based on this, one would think that during the years where mortgage rates dropped, we would see real estate rise even more.
After all, it's more attractive to buy real estate when your interest expenses are lower – but it's the opposite.
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