Falling mortgage rates often indicate economic troubles, as they are usually accompanied by higher unemployment, which can limit homebuying despite lower financing costs.
In years of falling mortgage rates, unemployment averaged 6.4%, contrasting with 5.5% during years of rising rates, demonstrating the correlation between job markets and home affordability.
While cheaper mortgages may help affordability, they often slow home price appreciation, which averages 4% growth in years of falling rates compared to 7% in rising rate periods.
Despite a modest increase in homebuying transactions during falling-rate years, the economic weakness that prompts lower rates tends to dampen overall housing market momentum.
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