"High and rising real house prices in Canada since the late 1990s can be mostly explained by long-run movements in incomes, housing supply, mortgage interest rates and credit conditions. This implies that the outlook for house prices depends largely on the future paths of these variables. For example, mortgage rates will at some point rise from historically low levels. All else being equal, and under certain assumptions, our model suggests that a 100 basis point rise in mortgage rates from, say, 2.5 to 3.5 per cent would decrease real house prices by about 12 per cent over the subsequent 5 years. It is difficult to be overly precise about these estimates and, in practice, higher mortgage rates could be correlated with stronger incomes that could provide some partially offsetting support for house prices. These aspects would need to be taken into account in a more refined projection."
http://www.bankofcanada.ca/wp-content/uploads/2015/11/wp2015-40.pdf
4 comments:
Great blog of this implies that the outlook for house prices depends largely on the future paths of these variables.Thanks for sharing......
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