November 18th, 2017
I’ve had a few clients, both on the buying and the selling side ask me “Are Palos Verdes Home Values effected by rising interest rates?” Your first knee jerk reaction might be that they are and are to the down side. But is that really the case?
Let’s take a look
If you click on the chart, you will be taken to an interactive site for that chart. I’d like you to look at the time period between September of ’93 and May of ’00
Are Palos Verdes Home Values effected by rising interest rates?
So again, look at the period from 1993 to 2001 when interest rates rose from (30 yr fixed) from 6.91% in September of ’93 to 8.52% in May of ’00.
What happened to prices in that same period of time? They went up.
There is factually, little correlation between interests rates and home values. What correlation there is, is far outweighed by other economic facts such as…
- supply and demand balance and you saw from the Palos Verdes Estates supply/demand # of months of unsold inventory index here We are at one of the greatest imbalances in 5 years favoring low supply and high demand and
- understanding why interest rates rise – there are two main reasons
- bond traders fear inflation (good for real estate price appreciation) and/or
- bond traders are factoring in an economy which is strengthening (good for real estate price appreciation)
In conclusion we can see that when we avoid “knee jerk reactions” and focus on the facts, we learn that there are more important factors which effect Palos Verdes home values – supply and demand trumps all! Clearly the answer to “Are Palos Verdes home values effected by rising interest rates” is no.
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