No, they don’t.
At least, according to this consultant’s study of Manhattan’s housing prices over the past thirty years.
The 30 years of Manhattan data provided an interesting data set to study real estate prices. We looked at the relationship between 30-year mortgage rates and the average price of a Manhattan apartment over this 30 year period in the hopes of showing a relationship between the two quantities.
The data did not support the usual claim that rising interest rates causes a decrease in market prices, and dropping interest rates causes an increase in market prices.
I am very, very surprised. I thought that any increase in interest rates would directly lead to a drop in housing prices. And, conversely, I always believed that the increase in housing prices was due to low interest rates.
That’s just not true, I guess.
Two other pieces of information from his study. First, homes (at least in Manhattan) are still not as expensive as they were in the mid-80’s (adjusted for inflation). Second, home prices in Manhattan went down following 9/11, and are still lower, on average, than before then, even though mortgage loan rates fell at least 2% during that time.
Yes, it’s about Manhattan real estate. It’s probably just as true, here.
More details: Are Real Estate Prices Dependent on Mortgage Rates? An article by Lucas Finco