Coldwell Banker Premier Realty

Home prices and mortgage rates

There are more variables than two
Posted: September 08, 2010 by John McClelland

David Leonhardt had an interesting post in the New York Times business section today. He provides an exibit of home prices against mortgage rates. As you can see from his chart, the relationship is not very close, that is they are not cointegrated. The relationship betweent the two series is not direct, presumably because the borrowing rate is not the only variable people need to think about prior to their home purchase. Job growth, family size, comparable rents and other factors are mixed in there too. Nevertheless, a combination of low prices and low rates does make a purchase more attractive (though many still use cash). People really do care about a monthly payment and in many cases in Las Vegas, a monthly payment is often lower than in a comparable rental. The other factor in the decision is how a home purchase may effect your mobility and where you want to raise your family.

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