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When Lower Mortgage Rates Don't Boost House Prices

"A 2006 study of mortgage rates and New York City housing prices going back to 1975 by Lucas Finco of Quadlet Consulting found no correlation between lower mortgage rates and higher housing prices, or vice versa. "The relationship between mortgage rates and home prices is pretty obscure," says Jack Guttentag, a professor emeritus of finance at the Wharton School of Business."

That is not even the right question to ask. It is impossible to even imagine that a lower mortgage rate would make prices rise again right now. We all know they are going to fall further, because the inventory is to high.

The main question is: does a lower mortgage rate clear up inventory faster? I'm inclined to that theory because it allows refinancing and it lures more "greedy" buyers back into the market. West would benefit from that, since the prices have fallen to a level where sales have gone up in the past year.