Study: Higher Rates Cut House Prices 10%+

Higher mortgage rates have reduced house prices throughout the United States by more than 10%, according to a study by Christopher J. Mayer, Paul Milstein professor of real estate and senior vice dean at Columbia Business School. For the past 20 years, mortgage rates have averaged 1.6% above the 10-year Treasury rate, whereas in today's distressed market they exceed that rate by more than 2.4%, according to the study. Professor Mayer's analysis predicts that further deterioration in mortgage markets and economic fundamentals will cause house prices to keep falling nationwide, including in "bubble" markets such as Miami, Phoenix, and Tampa, Fla., where he says prices are likely to drop at least another 10%-15%; coastal markets such as San Francisco, Boston, and New York; and hard-hit markets such as Detroit and Cleveland. "The problems in the mortgage market have put the nation's housing in a downward spiral that will be hard to break," he said. The Columbia Business School can be found online at http://www.gsb.columbia.edu.