NEW YORK–Should mortgage rates remain at 8% and higher for an indefinite period, home prices are going to take a hit, according to Morgan Stanley.
“If rates, which briefly reached 8% this past week, move back up and stay there for a protracted amount of time, existing home prices could fall as much as 5%,” the investment bank said, according to The Street. “That would be a shock to sellers, many of whom already are seeing sales drop in local markets. Buyers would be hurt, too. Supply for homes is already tight, and obtaining financing would be harder.”
The Street further reported mortgage rates at 8% or so could cause home prices to be flat by the end of the year, under Morgan Stanley's base-case forecast. And if mortgage rates just stick around this level, demand will see downside pressures increase, the forecast adds.
Could See 5% Drop
Morgan Stanley’s view: "Even a 5% growth in inventory next year would yield a 5% drop in home prices by December 2024 if it came alongside zero increase in sales,” according to The Street.
As an example of what a difference the rate forecast could make, The Street noted that a 4% loan on a median-priced home at $394,000 and a 17% down payment would have a monthly payment of $1,563. At 8%, the payment jumps to $2,402, The Street added.
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