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Pro Teck’s Home Value Forecast: Interest Rate Hikes To Slow Home Price Appreciation

Model Predicts San Francisco Could See 10% Drop in Home Prices if Rate Rises More Aggressively than Predicted

March 28, 2017, WALTHAM, MA – This month’s Pro Teck Valuation Services Home Value Forecast examines how future increases in the interest rate could impact the nation’s housing market — particularly home prices in some of the country’s hottest metros.

The Federal Reserve earlier this month raised the interest rate 0.25 percentage points, only the third rate increase since the housing crisis. Rates are forecasted to go up even further over the next five years from today’s 4% to 5.25%.

Home Value Forecast has been reporting about all-time highs in communities like San Francisco, CA, Nashville, TN, and Raleigh, NC, throughout this period of historically low interest rates. However, with future interest rate hikes a certainty, the question now becomes — what happens if rates go up more than expected? Could there be a slowdown, or a reduction in home prices if it costs more to borrow money?

“The simple answer is, yes,” said Tom O’Grady, CEO of Pro Teck. “Sale price appreciation is forecasted to taper off in all three metros as interest rates increase. San Francisco is already anticipated to experience a slight dip due to the two rate increases from the Fed over the last several months.”

If interest rates increase 10% or 25% more than forecasted, things could get interesting in the three aforementioned metros.

In the modeled scenarios, each metro would experience home price reductions if rates rise more than anticipated. San Francisco, because of its already high cost of housing and lower affordability, could see as much as a 10% dip in home prices if rates increase more than anticipated.

Click here to read the entire forecast, including data and graphs that further highlight market trends discussed in this release.

CBSA Winners and Losers

Each month, Home Value Forecast uses a number of leading real estate market-based indicators to rank the single-family home markets in the top 200 CBSAs and highlight the strongest and weakest metros.

Top 10 CBSAs this month include:

  • Bremerton–Silverdale, WA
  • Greeley, CO
  • Mount Vernon–Anacortes, WA
  • Nashville–Davidson–Murfreesboro–Franklin, TN
  • Oak Harbor, WA
  • Ogden–Clearfield, UT
  • Redding, CA
  • Richmond, VA
  • Seattle–Bellevue–Everett, WA
  • Boston, MA

Once again, the Top Ten is all about supply, with all ten metros experiencing an increase in sales, a decrease in active homes on the market and a reduction in active days on market.

Seattle has the lowest Months of Remaining Inventory (1.56) and lowest active days on market (37). And as has been the case, the lower end of the market is the tightest, with MRI for homes selling for under $400,000 at 0.24, and for all homes under $800,000 less than 0.5.

Bottom 10 CBSAs this month include:

  • Youngstown–Warren–Boardman, OH-PA
  • Miami–Miami Beach–Kendall, FL
  • Augusta–Richmond County, GA-SC
  • Chicago–Naperville–Arlington Heights, IL
  • Las Cruces, NM
  • Little Rock–North Little Rock–Conway, AR
  • Scranton–Wilkes-Barre–Hazleton, PA
  • Killeen–Temple, TX
  • McAllen–Edinburg–Mission, TX
  • Huntsville, AL

Eight of the Bottom Ten CBSAs have experienced a negative percent change in active listings — a healthy sign — with only the McAllen-Edinburg-Mission, TX, and Huntsville, AL, metros showing an increase. Six of the bottom ten also saw a decrease in MRI.

Looking at Months of Remaining Inventory for the Huntsville, AL, metro, it’s once again evident that the bottom of the market is the most competitive, with less than five months MRI for homes costing less than $200,000. Higher priced homes seem to be staying on the market for extended periods. For example, homes priced between $500,000 and $549,000 remain on the market for an average of 17 months.

About Home Value Forecast

Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services. HVF provides insight into the current and future state of the U.S. housing market and delivers 14 market snapshot graphs from the top 30 CBSAs.

HVF is built using numerous housing and economic data sources. The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a corporate subscription to the service. To learn more about Home Value Forecast and Pro Teck’s full suite of residential real estate valuation products, visit www.proteckservices.com. You can also find Pro Teck on Twitter at @ProTeckServices.

Reporters interested in national, regional or metro level housing data tailored to meet story needs, please email your inquiry to mediarequest@protk.com.

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Media Contact: Thomas Hoff, Pro Teck Valuation Services
781-314-1669 or tom.hoff@protk.com