Three small tools for thinking about house prices, inflation and loans. Test a common story against the public record, see what cash loses when prices rise, and try a refinance what-if. Every number comes from public data or from you, and nothing here predicts what rates or prices will do next.
A common story says rising interest rates crush house prices. Here is the record so you can check it yourself. Pick a period of years, or start with a preset, and compare the mortgage rate with house prices and consumer prices.
The years in each preset are worked out from the data, not typed in. 1970s rate climb runs from the first full year of the mortgage-rate series to the year with the highest average rate. Recent rate jump runs from the year with the lowest average rate to the latest year that is a full year in both the mortgage-rate and the house-price series.
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| Measure | Start | End | Change |
|---|---|---|---|
| Mortgage rate (annual mean) | |||
| Median new-house price (annual mean) | |||
| Consumer prices (CPI annual mean) | |||
| Median new-house price after inflation | |||
| Corporate debt securities outstanding (year-end level) |
Corporate debt securities outstanding is the amount of debt owed at the end of each year. It is not new issuance.
Rate change (percentage points) = end-year mean rate − start-year mean rate.
House-price change % = (end-year mean price ÷ start-year mean price − 1) × 100.
CPI change % = (end-year mean CPI ÷ start-year mean CPI − 1) × 100.
Price after inflation % = ((P_end ÷ P_start) ÷ (CPI_end ÷ CPI_start) − 1) × 100. The End column shows the end price converted into start-year dollars: P_end × CPI_start ÷ CPI_end.
Debt outstanding change % = (last value of the end year ÷ last value of the start year − 1) × 100.
A year's mean is the average of that year's observations in the data file. Its last value is the final observation of that year.
Source: FRED, Federal Reserve Bank of St. Louis
Cash that sits still buys less when prices rise. Enter an amount and two years to see what that cash buys in the later year, what you would need then to match it, and how the same amount compares with the national median price of a new house.
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amount × CPI of the from year ÷ CPI of the to year. CPI is the yearly mean of the index values in the data file.amount × CPI of the to year ÷ CPI of the from yearamount × median new-house price of the to year ÷ median new-house price of the from year, using yearly means. These are national averages for new houses sold, not the price of your home.Series used for this section:
A higher rate today can come with a plan to refinance later, if rates fall. That is an option, not a promise. It only works if rates really do fall, if you still qualify (your income, your credit and the equity in your home all matter) and if the fees are worth it. Try your own what-if numbers below. The possible future rate is a number you choose, not a forecast.
This assumes a fixed-rate loan with the same payment every month. Refinance costs are paid in cash on the refinance date, and the new loan is the balance left by then. Taxes, insurance, mortgage insurance and any early-payoff penalty are not included.
Monthly payment = B × r × (1 + r)^n ÷ ((1 + r)^n − 1), where B is the loan balance, r is the annual rate ÷ 12 ÷ 100 and n is the years left × 12. If the rate is 0%, the payment is B ÷ n.Balance after k payments = B × ((1 + r)^n − (1 + r)^k) ÷ ((1 + r)^n − 1), where k is the months until you refinance. If the rate is 0%, the balance is B × (n − k) ÷ n.The same payment formula, with B = the balance left on the refinance date, r = the possible future rate ÷ 12 ÷ 100 and n = the new term in years × 12.Monthly difference = current payment − new payment. A positive difference means the new payment is lower. A saving of less than half a cent a month counts as no saving.Break-even months = refinance costs ÷ monthly difference, only when the monthly difference is above zero. Otherwise the answer is never. It ignores that a new term starts the clock again.Total if you stay = current payment × payments left on the current loan after the refinance date. Payments are not rounded to the cent, so a total can differ from payment × months by a few dollars.Total if you refinance = refinance costs + new payment × payments on the new loan.