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    Freddie Mac: Rising Mortgage Rates DO NOT Lead to Falling Home Prices

    Freddie Mac: Rising Mortgage Rates DO NOT Lead to Falling Home Prices | MyKCM

    Recently, Freddie Mac published an Insight Report titled Nowhere to go but up? How increasing mortgage rates could affect housing. The report focused on the impact the projected rise in mortgage rates might have on the housing market this year.

    Many believe that an increase in mortgage rates will cause a slowdown in purchases which would, in turn, lead to a fall in house values. Ultimately, however, prices are determined by supply and demand and while rising mortgage rates may slow demand, they also affect supply. From the report:

     “For current homeowners, the decision to buy a new home is typically linked to their decision to sell their current home… Because of this link, the financing costs of the existing mortgage are part of the homeowner’s decision of whether and when to move.

    Once financing costs for a new mortgage rise above the rate borrowers are paying for their current mortgage, borrowers would have to give up below-market financing to sell their home.

    Instead, they may choose to delay both the sale of their existing home and the purchase of a new home to maintain the advantageous financing.”

    The Freddie Mac report, in acknowledging this situation, concluded that prices are not adversely impacted by higher mortgage rates. They explained:

    “While there is a drop in the demand for homes, there is an associated drop in the supply of homes from the link between the selling and buying decisions. As both supply and demand move together in this way they have offsetting effects on price—lower demand decreases price and lower supply increases price.

    They went on to reveal that the Freddie Mac National House Price Index is…

    “…unresponsive to movements in interest rates. In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

    The following graph, based on data from the report, reveals what happened to home prices the last six times mortgage rates rose by at least 1%.

    Freddie Mac: Rising Mortgage Rates DO NOT Lead to Falling Home Prices | MyKCM

    Bottom Line

    Whether you are a move-up buyer or first-time buyer, waiting to purchase your next home based on the belief that prices will fall because of rising mortgage rates makes no sense.

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    Carin Nguyen

    Carin Nguyen takes the business of real estate very seriously and she has the track record to prove it. She holds the recent prestigious title and ranking of the #1 realtor in AZ for sides as awarded by the Wall Street Journal. Carin is an Arizona native and fully understands the complexities and changing landscape of the Arizona market. She has been in the real estate industry for over 10 year’s full time and comes by her expertise honestly, having honed it during years in the finance and mortgage industries. Education and knowledge is key in getting her buyers and sellers what they what. A rich resume built with a tireless commitment to her clients, undeniable proven past success and an uncompromised vision for the future create the recipe for complete customer satisfaction. Carin understands the potential emotional stress and sometimes life altering experiences felt by clients during the real estate transaction process. Carin is unyielding in insisting on complete professionalism from herself and her team while understanding that real estate is a personal business. She thrives on managing the details and individuality of each transaction and client. Her clients know that having Carin on their side means they have an advocate who cares about them and their needs. Carin is convinced that building relationships will ensure continued satisfaction and be reflected in future success. There is no denying what provides Carin with her constant strength. Her family is “at the heart of my motivation to push myself to achieve my goals and to be forthright in all that I do. My husband, Son, is my biggest source of support, my coach and my best friend. I am truly blessed with a loving husband and four great children who collectively strengthen my resolve to be the best at all my endeavors. I can be a wife and mother and still be a successful Realtor because I tackle everything with all that I have. My motto is ‘Working Hard To Get Homes Sold’ for a reason. I am thrilled that so many families have made me their real estate consultant.” A commitment to professionalism, an empathetic and understanding approach to her clients and an unstoppable and dependable force from her family all ensures success for Carin and most importantly, her clients

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