Boston condo prices and interest rates.
As a Boston real estate broker I hear it all the time, Boston condo sales and sales prices will go down once interest rates go up. Theoretically, this sounds logical; it’s going to cost the new condo buyer higher monthly mortgage payments if interest rates go up. Logically one might also think that demand will also fall if interest rates go up.
But wait a minute, historically this logic is wrong. As the chart above shows, the last four times that mortgage rates increased the home values also increased from a low of 1.2% to over 10%.
So if you’re a Boston condo buyer sitting on the sidelines thinking Boston condo prices might go down because the experts think interest rates will be going up, remember there’s no guarantee that this logic will work, at least not historically.
Home prices and rise of interest rates.
Looking from a historical point of view, the rise of interest rates seem to have no bearing on the value of real estate. Here are a few examples to support this claim:
1. May 1993 the interest rate was 12.63% by July 14.67%, yet home values in that time period increased 6.6%.
2. March 1987 the national interest rate was at 9.04% by October the same year the interest rate rose to 11.26%, but home values also increased to 5.2%.
3. October 1993 mortgage interest rates stood at 6.83% by December 1994 rates were at 9.20%, that same period home sale prices rose 1.2%.
4. April 1999 interest rates were recorded at 6.2% by May 2000 they were at 8.52%, yet home sales prices rose 10.9%.
Source: Calculated Risk
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Updated: January 2018