San Diego Housing Market News and Analysis
Interest Rates and House Prices
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Submitted by AmenhotepIII on September 8, 2011 - 5:11pm
Been following the housing market in San Diego since 2003-ish, saw the boom and bust and there's something that I'm trying to extrapolate out how the current really low interest rates. I believe at least a basic relationship between interest rates and housing prices is that when rates go up that prices tend to go down (and visa-versa), as the majority of people buy houses with 80% borrowed money. So with prices on average pretty low and interest seemingly now setup for a mid-2013 increase (referring to Fed's statement).
So my question which may be obvious is, as house prices drag along the bottom what will happen when the housing rate increases to say 6 to 7%? I see two things as possible, both could be 100% wrong though. The banks raise the down payment requirement so buyers will have to put more down to somewhat offset the rates? Or, SD house prices drift down to compensate?
Just interested in opinions, as in the 1990's boom/bust I seem to remember the interest rates had room to fall along with prices.
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