by Calculated Risk on 2/10/2022 12:05:00 PM

Today, in the Calculated Risk Real Estate Newsletter: The Impact on Housing of Higher Mortgage Rates

A brief excerpt:

Looking back at previous periods with similar increases in mortgage rates - like in 2013 when mortgage rates increased from 3.4% to 4.5% from May to July - new home sales fell from about 440 thousand per month to about 390 thousand per month. This was a decline of about 10%.

There was a similar decline in 1994 when rates increased from 7.2% to 8.4%, and new home sales fell from around 730 thousand to 650 thousand. And in 2018, rates increased from around 4.0% to 4.9%, and new home sales declined from around 650 thousand to 590 thousand.

There are other periods when rates increased - like in 1999 - and new home sales only declined slightly. Here is a graph of 30-year mortage rates. The arrows point to the three periods mentioned above.

...
With 4% 30-year mortgage rates, we will likely see a slowdown in both new and existing home sales (based on previous periods of rising rates). It also seems likely house price growth will slow. However, the impact on inventory is unclear.

An interesting question: Will higher mortgage rates slow investor buying? Higher rates will make buy-to-rent less attractive. Investor buying - and build-to-rent - will be areas to watch.

There is further downside risk if mortgage rates continue to increase, or if we see a significant increase in inventory (something we didn’t see in previous periods of rising mortgage rates).

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/