Rates Are High??
Today I had a conversation with a prospective client who called to discuss a condo in Pacifica. We talked about the complex, the market, recent sales and then I hear, “But interest rates are high right now.” I had to say – I couldn’t resist, “It depends on what you’re comparing it to.”
The timeliness of Jim Duncan’s post couldn’t be better. We have to put this in perspective.
Interest Rates/Housing Price See-Saw
There’s plenty of debate about whether or not interest rates and housing prices are on a see-saw. Charles Hugh Smith says yes. Angry Bear says no: Historically interest rates have been largely irrelevant to the price of a house. Arcadia Housing Blog says yes. I say it proves one thing: It depends on who you ask.
I’m no statistician, but I don’t see it. The chart at the this link shows the annual average sales price history for California from 1968 to 2006. Then compare that to the interest rate history link here.
1975 to 1991 averages sales prices rise; 41,600 to 200,660. Rates go between 8.5 to 16.32.
1992 to 1996 prices drop; 197,030 to 177,270. Rates are 7.03 to 9.2.
1997 to 2006 prices increase 556,640. Rates are 5.45 to 8.52.
Maybe I’m comparing the wrong dates to the wrong rates. If you’re a pencil pusher and have a calculator, explain it to me. I don’t get it.