Home prices have been on a tear since late 2020 despite generally higher rates in 2021. In the past few months, rates have upped the ante by surging at one of the fastest paces in history.  But in data just released this week, home prices are moving higher at an even faster pace. What’s up with that? First, let’s take a look at rates.  We already examined the phenomenon in detail Mortgage Rates Skyrocketing Toward 5%?” data-contentid=”623e411ae3232a3138ab4c44″ data-linktype=”newsletter” rel=”noopener”>last week, and there were no major changes this week. Actually, the absence of major changes is one of the most promising developments in weeks.  As oil prices and inflation expectations have leveled off, rates have attempted to find some sort of ceiling.  Whether it’s temporary or longer lasting remains to be seen. The following chart shows the leveling-off process in terms of 10yr Treasury yields, which give us a more detailed short term view of rate trends. Mortgage rates only get one data point per day, so it’s much harder to see that they’ve leveled off a bit this week, but still very easy to see how much they’ve risen in 2022.   That brings us back to this week’s big question : if mortgage rates have moved up so quickly, why are home prices still rising? There are a few parts to the answer.  The first thing we have to consider is the unprecedented supply/demand environment in the housing market combined with a surge in incomes, not to mention the chain reaction of people being able to sell their homes for much higher values who then can spend more on their next home.  Housing economists will be sorting these variables out for years, but the point is that there’s more to home prices than rates.  
Source: Mortgage News Daily