The Fed's rate hiking campaign has brought activity in the U.S. real estate market to a crawl. But prices have barely budged
with a flurry of interest rate increases, which have raised mortgage rates — making housing more costly to finance and driving sale prices lower.The deepest downturns in prices are in New Zealand and Sweden, two nations that saw surging home prices earlier in the COVID crisis. And the majority of borrowers in both countries have floating rate mortgages that reset with rising interest rates, which means household finances are put under pressure quickly — forcing some owners to sell.
In contrast, the percentage of variable rates in countries like the Netherlands is much lower. The Netherlands and Denmark also have fairly large systems of subsidized public housing, meaning that people who, in countries like Sweden, might stretch to buy — and then be forced to sell — are more insulated from the rate increase.
In the U.S., home of the uniquely American 30-year fixed-rate mortgage, the price impact — at least so far — of the rise in rates has been muted. "Golden handcuffs" — mortgages taken out while rates were low — incentivize people to hang onto their home rather than trade up to a new one.Countries have different systems, and it's hard to say what's better or worse.
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