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Mortgage Rates Could Tank Home Prices by 20%, Fed Study Finds

  • Dallas Fed study maps out potential impact of jump in rates
  • US house prices tumbled over 32% from 2006 high to 2009 low
Home Prices Suggest Housing Bubble Brewing In U.S.
Photographer: David Paul Morris/Bloomberg

US house prices could tumble as much as 20% in the wake of the surge in mortgage rates, according to research from the Federal Reserve Bank of Dallas.

House prices, adjusted for inflation, soared during the pandemic by the most since the 1970s, analysis by Dallas Fed economist Enrique Martinez-Garcia showed. A “pessimistic” scenario where prices now retreat by 15% to 20% could subtract 0.5% to 0.7% from inflation-adjusted consumer spending, he wrote in a blog post Tuesday.