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Will increasing rates reduce home prices?

With some fears that increasing interest rates could dampen the economic recovery, some pundits have theorized that the rising rates could pull home prices back downward. In response, Fannie Mae researchers studied the correlation between rising interest rates and home prices back to 1990. The conclusion was that rising rates do not reduce home prices. Home prices generally level out when a large spike in rates occurs, but it is very rare for prices to actually drop.

(source: Joe Massey, Castle & Cooke Mortgage)

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