Following up on my earlier post, I need to clarify (i.e., correct) what I wrote earlier.
A New York City consultant had studied some data from the past thirty years which led him to the conclusion that housing prices fluctuated without regard to mortgage loan interest rates. This flies in the face of all logic and contradicts what most people believe, including me and just about every economist, statistician, and living person.
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.
Well, I’m happy to report that other, smarter people have done their own analysis, and have come to the opposite conclusion, or, at least, find enough holes in the consultant’s argument to make his results very suspect.
Jonathan J. Miller, co-founder, principal, president and CEO of residential real estate appraisal firm Miller Samuel has this to say:
I think a lot of the problem is the data set chosen.
The subject is the Manhattan market which does not always behave like the national market due to the international nature of the local economy as well as the predominant co-op housing stock (this has kept investors out during this recent boom).
He [the consultant] uses fixed mortgage rates yet adjustable rates are one of the primary drivers of the recent housing boom.
Plus he makes the assumption that mortgage rates are the only factor that causes prices to fluctuate. Over the past 10 years, the Manhattan housing market has been plagued by the chronic limitation in supply. So the premise of rising rates causing prices to slow would not be immediate if inventory is tight.
Despite all this, my stats do show a clear pattern of influence of mortgage rates using a CPI adjusted 1-year adjustable and a 30-year fixed unadjusted.
Just Because Thereâ€™s A Chart Involved, Doesnâ€™t Mean The Message Is Accurate – By Jonathan J Miller, Matrix