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Washington Mortgage Rates: How Will Rising Mortgage Loans Have an Impact on Home Prices?

Earlier today, Freddie Mac announced that the average interest rate for a 30-year fixed mortgage loan rose again, climbing to its highest level in seven years. Home prices in Washington State, meanwhile, continue to climb steadily as we move toward summer of 2018.

A common question among home buyers and homeowners is: Will rising mortgage rates have an impact on home prices in Washington? Are they even related?

The short answer is that loan rates do not have a direct impact on housing prices, though they can affect demand. Additionally, the latest forecasts suggest that Washington home values will continue to rise steadily into 2019.

Mortgage Rates Hit a 7-Year High in May 2018

mortgage timelineAfter settling into a plateau over the last few weeks, mortgage rates nationwide jumped again this week. The average rate for a 30-year fixed mortgage bumped up to 4.61% for the week ending May 17, 2018. That’s based on the long-running mortgage industry survey conducted by Freddie Mac. According to that report, this week’s average “matches the highest level since May 19, 2011.”

Granted, rates can vary from one borrower to the next, due to a number of variables. The use of discount points, the type of loan being used, and the borrower’s credit situation can all influence the rate applied to a home loan. But overall, the trend for mortgage rates has been an upward climb since the start of 2018.

At times like this, a common question from home buyers and homeowners is: Will rising mortgage rates affect home prices in Washington? Will prices drop sometime in the near future, as a result of rising interest rates?

As mentioned above, mortgage rates generally do not have a direct impact on mortgage rate trends. Higher rates can soften demand, which in turn could remove some of the upward pressure on house prices. But there is no direct link between the two.

Home Prices Up by Double Digits, Year Over Year

As we’ve written in the past, home prices across the state of Washington are expected to continue rising into 2019. This is largely the result of limited supply and strong demand within the real estate market. When a lot of people want to buy something, but there’s not enough of it to go around, prices tend to rise. That’s what we are seeing in Washington right now.

According to the latest data reported by Zillow, the median home value for Washington State rose by 11.5% over the last year or so (as of May 2018). Also during that month, the company’s economists predicted that the median “will rise 6.1% within the next year.” This particular forecast extends into spring 2019.

no cost mortgageSo it’s unlikely that rising mortgage rates would have a negative effect on home prices across Washington State. Supply and demand tend to have a much stronger impact on house values. And right now, the skewed supply-and-demand situation in the state’s real estate markets is boosting prices.

Related: Home prices not likely to drop

Of course, no one can predict future housing or mortgage trends with complete accuracy. But the general consensus among most reports and projections we’ve read is that home prices in Washington will very likely continue to rise through 2018 and 2019. That seems logical, given the supply and demand situation we are experiencing.

Disclaimer: This article contains data, trends and projections provided by third parties outside of our company. We have compiled them here merely as an educational service to our readers.

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