Will Increasing Mortgage Rates Impact Home Prices? - The Melton Team

Dated: December 13 2023

Views: 245

There has been some discussion recently on home prices in relation to mortgage rates. Some believe if there is a rapid rise of mortgage rates, home prices should decrease. Logically it makes the most sense for the price of the house to drop when interest rates are rising, but this is not always the case.

This theory of home prices decreasing is typically discussed by future home buyers. As a buyer you would like to think if you are paying higher rates on your mortgage, you should be able to see a decrease in cost somewhere else. Unfortunately, these rates are rising because the economy is in better shape. As the economy succeeds, incomes rise, rates go up, as well as the price of the home.

A recent study by the John Burns Real Estate Consulting found mortgage rates have very little impact on the cost of the home. The housing market and price increases are affected by things like job growth in the area and rising wages. Coincidentally, these same factors are causing the rise in the mortgage rates since people can afford to take out more.

Bottom Line

As the economy progresses and strengthens, mortgage rates and home prices will fluctuate. It is a misconception as rates increase, home prices will decrease. Advances in the economy have shown that rates and home prices are more likely to increase together.

Real estate agents have seen the same business models for the past 40+ years.

There are generally three broad categories, all with their own advantages and disadvantages.

Full Service Broker or Franchise:

All of these companies have the same basic principles. They offer full time agents the ability to run and business within a business in exchange for a portion of their commission. The more services the broker or office provide, the more it costs the agent in the form of a percentage of their commission earned. Typical splits start at 50/50 and go up as high as 90/10, based on annual production.

100% Commission Broker or Franchise:

RE/MAX was the first company to offer the 100% commission model. Basically, you keep up to 100% of your commission, but you pay your share of the company expenses along with franchise fees or corporate adversiting dues. If a company costs $100,000/mo to operate and pay all of the employees and there are 100 agents, each agent would pay $1,000/mo and keep 100% of their commission. This example is over simplified, but gives a good idea of the basic principles.

Discount Real Estate Broker:

Basically any combination of the above with compensation, with less services. Discount brokerages pop up in a seller's market and fade away in a buyer's market, much like For Sale By Owner homes. The basic premise is high volume sales for a limited service at a discounted rate. Most of these discount brokerages are thought of as a race to the bottom.

eXp Realty:

The game changer has arrived! The basic principles at eXp are the consolidation of service and support available online. Elimination of large office buildings that are rarely used by successful agents that are mostly in the community working with clients. Elimination of all of the franchising and individual office owners. Take all of that extra money (billions) and let the agents build their own company and bring all of their favorite agents along with them. It is a brilliant system that works at any size and is scalable up and down with the conditions of the market.

Remember the office with 100 agents? What if agent count goes down to 50? Do you think expenses go down? No way!

eXp has flipped the script. Instead of a few billionairs and several millionaire owners, they are creating hundreds of millionaire agents, which will most likely become thousands. With eXp Realty being so radical and new, let's take a look at the often skeptical mind of a potential eXp agent.

We have been programed to recognize "the catch" or something that seems too good to be true. For good reason; there are a lot of empty get rich quick schemes in the world. Follow the math and you'll see why this works so well. Without further ado or however you say that :), here are the ...

8 Stages of a Potential eXp Agent:

Stage 1: Close minded “I think I know.”

eXp is just... I’m not interested. I've heard it's a pyramid scheme. I need an office. I can't work from home.

Stage 2: Curiosity “I’ll ask around.”

It sounds too good to be true. I don’t want to recruit. It’s not sustainable. Besides, I love my broker and I don't want to make any changes right now. I just purchased all new signs, business cards, marketing materials, etc. Maybe I'll revisit this at the end of the year.

Stage 3: awareness “I’m paying attention I’m just not joining.”

If I’d joined sooner ... look at that stock price. It’s too late for me. FOMO.

Stage 4: Sincere interest “ok. I’m really serious now. Let’s look at all the numbers and details."

Wow, this is exciting. It is sustainable. There is support. What was with all the false narratives? I think I like this. This makes sense, but there just has to be a catch!

Stage 5: commitment. “I’m ready to sign up.”

What’s the transition plan? How does everything work? Who do I need to know? Let’s get plugged into everything and deal with the temporary pain of switching brokerages.

Stage 6: Enthusiasm “I wish I’d have joined sooner.”

Man this really is incredible. I see why everyone raves about it. I didn’t understand it and I get why no one could explain it to me properly without me experiencing it.

Stage 7: Overexcitement “Omg have you heard about exp?"

OMG it’s so amazing you have to join it’s amazing did I mention it’s amazing. Don't wait around like I did! I just don’t understand why I didn’t do this sooner. Why doesn’t everyone join? This is such an amazing opportunity I want all my friends to have what I have.

Stage 8: Longevity “im lucky to be here."

I give back and add value to as many as I can to pay it forward for the blessings I’ve received.” Let’s take full advantage of what we have and help everyone we can. Those who are ready and open will come when it works for them if they open their mind and listen. Those who plug in will be rewarded.

Are You Ready to Become a Shareholder at eXp Realty?

EXPI Stock - if you had invested $10,000 in EXPI in March of 2020, you would have over $184,000 in February 2021.Although we instantly recognized the value of this company from day 1, we wish we had listened sooner. Would we have over a million dollars more in our bank account had we known 3 years ago? Nope! More like $4 Million with a current anual income of over $900,000/year and growing! Above and beyond commission income!
Our team joined 48 hours after we learned about the business model. It’s already changed our lives in less than 10 months. We will earn the Million and more. We’re just getting started.
It isn’t too late for anyone, including you. If you want to explore one of these stages for yourself, let me know where you’re at and I’ll do my best to explain to you what you’ve been saying No to.

Yours Truly,
Hopelessly Stuck at Stage 7

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Erin Melton

Erin Melton earned her real estate license in early 2001. It didn't take her long to become one of the top real estate agents in Virginia. From rookie of year to over $550 million in sales, Erin has h....

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