Interest rates alone don't drive home prices.
If the past few economic recoveries say anything about interest rates, it's that the costs of taking out a home loan have almost no bearing on home prices.
Across 20 cities tracked by the Standard & Poor's Case-Shiller home price index, prices in May posted the biggest gains since 2006; the index rose 10.2% during the first three months this year.
The rebound has been driven by factors beyond borrowing costs, particularly as banks have tightened lending standards. For one, job growth has helped make families more willing to buy. Even though unemployment remains relatively high, employers have added jobs for 32 months in a row.
The situation today that differs from past high appreciation trends, is over 30% of buyers are cash buyers, circumventing the labored mortgage origination process. In addition, the unemployment level and economy was much stronger on the 1997-1999 and 2003-2007 boom years.
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