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Valuation Blog 3.21.2013
Why Are Housing Prices in Some Markets Responding Better Than Others to Low Interest Rates and Monetary Policies?

Pro Teck’s Home Value Forecast Examines Chicago and Phoenix to define underlying differences

Pro Teck Valuation Services’ Home Value Forecast (HVF) examines why home prices in some markets have been less responsive to low mortgage rates than would have been expected.  In the past, it has been widely thought that interest rates decline when the Fed commits to buy mortgage-backed securities.

This month’s Lessons from the Data highlight why that phenomenon may be changing and demonstrates the differences between the housing markets in Chicago and Phoenix and why interest rates and other housing factors impact on home prices.

The authors believe there are three reasons why interest rates and monetary policies are not stimulating housing prices as they have been historically:

  • Credit scores are lower for many impacted by defaults, employment issues, and other issues.
  • Tighter underwriting is making it more difficult for buyers to qualify and has increased the time it takes to secure a loan.
  • The investment appeal of housing and the presumption that homes will only go up in price has lost its some of its shine.

The authors determine in Chicago that the average prices per square foot for non-distressed sales may not be responding to the stimulus of low interest rates to the extent they had in the past.  In addition, the slow disposition of distressed real estate possibly due to the state’s judicial process for foreclosures could be having an impact on home prices.

“Affordability is definitely improved when interest rates are lower,” said Norman Miller, professor at the Burnham-Moores Center for Real Estate at the University of San Diego and contributing editor to Home Value Forecast. “But it is very likely that the top tiers of the owner-occupied housing market are the ones benefitting the most from lower mortgage rates as this group has been less affected by credit score downgrades or more restrictive underwriting.”

On the other hand, some markets, such as Phoenix, where low inventories and declining distressed inventories are dispatched even more expediently, seem to be recovering fastest.

To read the full story, please visit our Home Value Forecast page.  Reporters who are interested in data for their reporting area, as well as national, regional or metro level housing data tailored to meet specific story needs, please email your inquiry to mediarequest[at]protk.com.

About Home Value Forecast  

Home Value Forecast was created from a strategic partnership between Pro Teck Valuation Services and Collateral Analytics. 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 data sources including public records, local market MLS and general economic data.  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 us at  our website.  You can find Pro Teck on Twitter at @ProTeckServices.

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Media Contact:  Janice Walker, JD Walker Communications, LLC
781-290-6528 or jdwalker[at]jdwalkercommunications.com