A 1% increase in interest rate, reduces the buying power by 11%. Does this mean doubling of interest rates from 3% to 6% will result in drop in home prices by 30%. We have already seen prices drop between 10% to 20 % compared to the peak (differ by markets). In the last month as mortgage rates moved below 6%, surge in home buying and mortgage applications was seen. Home buying sentiment has an immediate dynamic response to movement in interest rates. Mortgage rates are expected to stabilize close to 5% for 30 year fixed by end of 2023, does this mean the home prices will be up by 10% by the end of 2023 compared to the beginning of 2023?
