It is not often that low mortgage rates coincide with low house prices – the condition that exists today in this country. When mortgage ratesare high, they tend to keep house prices from rising because it becomes too financially onerous to finance the house. When interest rates are low, it tends to stimulate demand for houses, pushing up the prices.
But we are in an unusual situation today.
The housing bubble which burst in 2008 caused not only a massive oversupply of homes across nearly the entire country, but it also precipitated the worst recession in over fifty years. The Federal Reserve , in response, cut interest rates sharply and despite the fact that the recession has officially been over for two years, it continues to keep rates low. It is trying to allow homeowners to refinance their mortgages at more favorable rates. However, the issue is complicated by the fact that many homeowners now have mortgages that exceed the value of their homes.