Home Appreciation and Lower Rates

Lower Rates and Home Price Appreciation Go Hand in Hand

Recent data from S&P CoreLogic Case-Shiller Index highlights an important trend: when rates moved lower last year, home price appreciation accelerated.

In fact, during the later part of the year — after the Federal Reserve signaled at its August meeting that rate cuts were likely ahead — home prices grew at an annualized pace of roughly 4–5% in the months that followed.

We’re now seeing early signs of that same dynamic re-emerge.

The Mortgage Bankers Association reported that mortgage rates last week were approximately 80 basis points lower than at the same time a year ago. The impact on demand was immediate:

• Purchase activity is up 12% year-over-year

• Refinance activity has surged 150% year-over-year

As rate decreases are widely anticipated in the months ahead, buyers should recognize what typically follows: increased demand and upward pressure on home prices.

In other words, waiting for lower rates often means competing with higher prices.

Buying sooner may allow borrowers to benefit not only from future refinancing opportunities — but also from the home price appreciation that tends to accompany falling rates and rising market activity.

Source: MBS Highway