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H P C Continues To Gather Pace In U S Market

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Drop in price of homes tied to mortgage rates

Guest Commentary

April 23, 2006

Sales of single family homes in Greeley/ Evans sold by real estate brokers are down 17 percent from first quarter of 2005. From Jan. 1 through April 1, 343 sales have been recorded in IRES, compared to 412 in 2005. The median price (half sold above/half sold below) was $160,000, down from $169,466 for single family homes, a 6 percent decrease. The current inventory of properties for sale (including town homes/condos) in Greeley/Evans by Realtors is 1250, a 12.5 month supply.
The drop in the median price of homes in the local market is very closely tied to the increasing mortgage interest rate. For every 1 percent increase in interest rate, the buying power of a consumer drops by 10 per-cent. Rates in the past year also are up for the standard 30-year fixed loan. This has equated to a decline from first quarter 2005 in buying power for the typical consumer by 5 percent, which is reflected by our slowing sales and lower median price of a single family home.

Some argue, "Ah buts its different here in the UK because our mortgage rates are not going up...." Or, "we don't have long term fixed rates like the Americans................"

1. IR rates are going up all around the world with the ECB indicating another hike in June, the Fed in May and the source of all the cheap money--Japan--has been issuing warnings daily that rates are going up and as they have loaned most of the cheap money in the first place their rate hikes wil have a direct impact on the UK.

2. US style long term fixed rate mortgages (30 year) are safer than UK-style short term or adjustable rates. If houses are dropping in price with long term mortgages they will drop that much faster with rates that are not fixed for a long term.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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