Housing Market Can Thrive in a Rising-Rate Era, According to First American Real House Price Index - Seite 2

House Prices Are Even More Resilient

“We also looked at how unadjusted house prices reacted in the same six rising-rate eras. House prices are clearly resistant to rising mortgage rates. Apart from the 1994 rising-rate period, when house prices declined slightly and briefly, house prices have always continued to rise, albeit more slowly, when rates have increased,” said Fleming. “In the 2005-2006 housing bubble, house prices eventually declined after initially increasing, but never declined below the level at the beginning of the rising-rate era.

“In the longest rising mortgage rate era, 1998-2000, nominal house prices increased consistently with the economic recovery from the previous recession. In just over a year and a half, house prices increased 14 percent,” said Fleming. “House price appreciation is resistant to rising mortgage rates primarily because home sellers would rather withdraw from the market than sell at lower prices – a phenomenon we refer to as ‘downside sticky.’”

Housing Market is Resilient to Rising Rates

“The lesson? Context matters and prices are ‘downside sticky.’ The housing market is complex and dynamic, and it responds to a variety of demographic, economic and monetary conditions. Rising interest rates reduce house-buying power and affordability, but are often a sign of a strong economy, which increases home buyer demand,” said Fleming. “By any historic standard, today’s mortgage rates remain historically low and will continue to boost house-buying power and keep purchase demand robust. At the same time, millennials aging into their prime home-buying years and a limited supply of homes for sale make for a housing market that is well positioned for rising rates. Economic and demographic context matters and, even if rising rates persist in 2021, the context is good for the housing market.”

November 2020 Real House Price Index

• Real house prices increased 0.5 percent between October 2020 and November 2020.
• Real house prices declined 6.2 percent between November 2019 and November 2020.
• Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 1.0 percent between October 2020 and November 2020, and increased 18.9 percent year over year.
• Median household income has increased 5.8 percent since November 2019 and 72.1 percent since January 2000.
• Real house prices are 26 percent less expensive than in January 2000.
• While unadjusted house prices are now 19.4 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 48.0 percent below their 2006 housing boom peak.

November 2020 Real House Price State Highlights