The Inverse Relationship: Why Interest Rates Drive Home Prices

When interest rates rise, mortgage payments increase, typically slowing down the growth of home prices.

Purchasing Power Parity

At 3% interest, a $2,500 monthly payment buys a much more expensive home than at 7% interest.

The 'Lock-in Effect'

Current homeowners with low rates are often unwilling to sell and buy a new home at a higher rate, reducing housing supply.

Investment Capital Shift

As rates go up, investors can get safer returns from bonds, which can decrease the demand for rental properties.