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Study Calculates Rate Impact on Home Values.(Report)
Byline: Amilda Dymi
New York-Mortgage rate hikes have had a significant negative impact on house prices throughout the U.S. reducing prices by more than 10%, according to new research by Columbia Business School real estate professor Christopher J. Mayer and senior vice dean Paul Milstein.
Mr. Mayer predicts "prices will keep falling nationwide due to a combination of continued deterioration in the mortgage markets and economic fundamentals."
These findings are concerning since he finds these problems have the power to place the nation's housing "in a downward spiral that is hard to break."
It is a cause-and-effect scenario triggered by the fact that house prices "are very sensitive to fluctuations in mortgage rates," the report notes.
What is different now is that if for the past 20 years mortgage rates have averaged 1.6% higher than the 10-year Treasury rate, currently the average rate is 2.4% higher than the Treasury rate.
It has increased the cost of first-time homeownership and most importantly - given the unprecedented number of subprime and ARM holders looking forward to refinancing their mortgage - makes refinancing into lower ...
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Source: HighBeam Research, Study Calculates Rate Impact on Home Values.(Report)