So when we conduct our scenario analysis, we see that a simple increase in the mortgage rate from 5 to 7.5, we would expect to see a 13% decrease in housing prices over three years.
I am not a math wiz. But this paper has some convincing arguments that suggest that housing prices are affected by changes in interest rate, with a 2-3 year lag. As mortgage rates have started to climb, this study suggest that home prices will be affected by the start of 2016. Curious to hear opinions on this study, and thoughts on owning real estate in a rising interest rate environment.
FOR PURPOSES OF FOCUS AND SCOPE - please ASSUME a rising interest rate environment.