The 23-percent spike we have seen in home prices since the housing market began to climb out of the recession is not easily explained by inventory and increased competition, as has been widely reported. According to a new report by financial service company Standard & Poor’s (S&P), mortgage rates aren’t the main culprit, either. The report, “The Economic Factors That Affect Housing Prices,” examined the market at a granular geographic level to gain insight into regional housing market dynamics and how they are affected by local macroeconomic factors. Mortgage rates are not the culprit Contrary to popular belief, mortgage rates have little influence over home prices, the report concluded. Instead, S&P's analysis showed that home prices are generally impacte...
- Inventory and increased competition fail to explain the 23-percent spike we have seen in home prices since the housing market crash.
- Standard and Poor's report titled “The Economic Factors That Affect Housing Prices” examined the market at a granular geographic level and concluded that five variables are to be credited for the increase.
- The correlation between mortgage rates and market prices was relatively weak.
- However, in forecasting where home prices may go in the next five years, S&P suggested that investors should prepare for a 25 to 28 percent decline in home values.