Many people wonder if falling mortgage rates affect the price and availability of homes. It’s a common misconception that if mortgage rates in Kansas City rise, prices of homes for sale must fall. If this was true, homes on the market would become less affordable for consumers. In actuality, there is not a strong, obvious relationship between interest rates and home prices.
Mortgage rates in Kansas City are determined by two different factors which set the supply and demand for credit:
High mortgage rates do not automatically translate into lower home prices. Logically, an increase in interest rates should drive down the price of homes. However other factors in the economy that typically come with those rising interest rates prevent that from happening. Inflation is actually credited with raising home prices, not interest rates.
A higher demand for housing pushes property prices up despite how high mortgage rates are at a given time. In some cases, high interest rates can make renting a home more attractive than buying, which reduces the demand for homeownership.
Mortgage rates in Kansas City generally rise because the economy is doing well and incomes are increasing. This increase in income leads to borrowers taking out larger mortgages because they are able to afford a bigger or more expensive home.
However, long-term rate fluctuations can affect the volume of home sales. Higher interest rates can negatively impact home sales. A quick and unforeseen upsurge in rates can cause a downward trend in home sales and change plans for some potential homebuyers.
It may cause buyers to:
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