Home values have historically been significantly impacted by mortgage interest rates. Lets look at significant years and decades to highlight this connection:
1. 1970s: Mortgage interest rates significantly rose during this decade. The typical interest rate for a 30-year fixed mortgage was around 7.5% in 1970, but by 1980 it had increased to almost 13%. Because higher interest rates meant larger monthly payments for borrowers, making it harder for them to finance homes, this increase in rates resulted in a decline in home values.
2. 1980s: Mortgage interest rates hit a record high during this time period. The typical 30-year fixed mortgage rate in 1981 was above 18%. Due to the high rate, there was less of a demand for homes, which resulted in a decline in housing values. However, rates had decreased to about 10% by the end of the decade, which sparked a rebound in the housing market.
3. 1990s: Mortgage interest rates kept decreasing throughout the 1990s. By the conclusion of the decade, the average 30-year fixed mortgage rate had decreased from over 8% in 1990 to about 7%. This drop in rates encouraged home buying, which led to a rise in property values.
4. 2000s: Mortgage interest rates were still low in the early years of this decade, with the typical 30-year fixed rate remaining about 6%. However, rates started to increase in the middle of the 2000s, and by 2007, they had risen to almost 6.5 percent. This rate hike contributed to the 2008 housing market collapse, which resulted in a sharp decline in home values.
5. 2010s: Following the collapse of the housing market in 2008, mortgage interest rates stayed low for a large portion of the decade. By the end of the decade, the average 30-year fixed mortgage rate had decreased from around 4% in 2010 to about 3.5%. This drop in rates encouraged home buying, which led to a rise in property values.
Mortgage interest rates have a considerable effect on home values, according to historical statistics. Lower interest rates typically result in higher home values and more demand for housing, whereas higher interest rates typically result in lower home values and lower demand for housing. Home values can be driven by a number of different variables, including the current state of the economy, the accessibility of finance, and demographic trends.