If house prices are to keep going up or even stay flat, rates must stay in a very low and tight range for a very long time.
Let’s be honest with ourselves, probably at least 50% of all the housing price recovery since 2011 has been due to one thing, artificially low mortgage rates manipulated by Fed. Not due to fundamentals in the economy like good jobs and rising incomes. The 50 year average of 30 yr fixed mortgage interest rates is 7-8%, that is where they should be. If they had not been pushed to ridiculously artificially low levels (30 yr fixed in the 3% range are you kidding me?), there is no way prices would be where they are today. Where do you think prices would be in SD if the 30 yr fixed was 7%? So this is all the proof you need this is a Fed engineered housing recovery, not a housing recovery based on real fundamentals.
With that said, rates could still fall further if we get bad economic news or stocks fall. 30 yr fixed rates could fall to 3.00% or in the 2% range, and housing may be stimulated once again. But ask yourself is all this healthy? Is it healthy for economies around the world to get addicted to low rates and QE vs. real growth? Is it healthy for the Fed to keep inflating assets? I mean we are in the 7th year since the end of the recession and rates are basically still at zero! There is something not quite right with that picture.
