
TL;DR
This paper develops a mortgage-rate-adjusted measure of home prices to better understand market dynamics and aid individual decision-making, revealing mortgage rates' long-term influence but limited role during COVID-19 price surges.
Contribution
It introduces a novel 'effective price' metric and a price-mortgage rate neutrality line to analyze housing market responses to mortgage rate changes.
Findings
Mortgage rates significantly influence long-term home prices.
Effective prices help neutralize mortgage rate effects in market analysis.
Mortgage rates were not the main factor in COVID-19 home price increases.
Abstract
In this paper, we investigate the impact of mortgage rates on home prices, and how the impact may be used to help property purchase discussions at individual buyer level and to adjust home price indices across time. A mortgage-rate-adjusted "effective price" is derived to measure near term property price in the presence of (expected) mortgage rate changes. A price-mortgage rate neutrality line is then constructed based on the "effective price" to help differentiate various market scenarios in the near term, which can be used by prospective buyers in their "to-buy or not-to-buy" deliberations. At the market level, effective home prices allow for neutralization of mortgage rates on the movement of the housing market. An application of the neutralization strategy to the Case-Shiller Home Price Index (HPI) indicates that the U.S. housing market has been considerably affected by the dynamics…
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
Taxonomy
TopicsHousing Market and Economics
