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Will Low Mortgage Rates Save The Housing Market?

By Bob Redtree

The housing market is stagnant, and has been for some time. The weak market continues, despite record low mortgage rates. Will the low mortgage rates assist the housing market’s recovery? By itself, rates alone will not help housing prices.

Housing Price Trends

One of the first questions to ask when wondering will low mortgage rates save the housing market is what is the overall trend of the market. With the recent bubble pushing prices to record highs, the puncturing of that bubble has put housing prices into a steep downward trend. This trend is slowing, but not yet reversed. Trends, by there very nature, tend to continue until the underlying nature of the market changes. Since rates were fairly low at the start of the housing downtrend, low rates alone will not be enough to reverse the trend.

Expectation of Future Rates

Today mortgage rates are low. On average, house buyers are expecting mortgage rates to remain low. Therefore, one way of thinking about whether low mortgage rates will save the housing market is the expectation of higher rates in the future. With a weak economy, there is little reason to expect rates to increase dramatically. Should the economy rebound sharply, and expectations of the Fed raising rates increase, more home buyers will expect future rates to increase. In this case, low current mortgage rates inspire consumers to purchase homes immediately, with the expectation that delaying their purchase will raise the overall cost of their home.

Will low mortgage rates save the housing market? Clearly not by itself. However, continuing low rates, along with an economic recovery and a reversal of the price trend will cause homes to once again appreciate in value, and the intensity of home buying to increase, thus saving the housing market.

Related posts:

1. Will Low Mortgage Rates Save The Housing Market?
2. Will The Current Mortgage Rates Help The Housing Market?
3. Will The Housing Market Improve If Mortgage Rates Are Steady?
4. Can Mortgage Rates Save The Housing Market?
5. Can Changing Mortgage Rates Help The Housing Market?