[quote=anxvariety] … I am not on a lease. The question isn’t particular to Coastal CA. How one can argue that change in interest rates will not affect prices? Assume I am not a renter, or buyer.[/quote]
Higher mtg interest rates in Coastal CA will only cause buyers to buy less house for the same money.
Due to the extremely “loose lending” rampant during the millenium boom (2003 thru 2007), 1st and 2nd time buyers became “conditioned” to expect a mid-level or even “luxury” home, area or both for the resources they had (DP, income and credit rating). After that period, this “conditioning” continued due to (artificially-induced by the GOV) historically-low mtg interest rates. Half of Gen X and all of Gen Y never even realized they had to “pay their dues” before acquiring their “dream home” that took previous generations 25 years and 3-6 previous home sales to achieve!
In a higher interest-rate environment (over 7.5% fixed), RE will still sell to buyers who need mortgages but each “tier” of it will sell to buyers with higher DP’s and/or higher income/credit qualifications.
The above paragraph does not apply to cash buyers or properties over about $1.5M.
After fixed mtg rates hit 12.5%, prices will still not go down but may stay stagnant for awhile. During this time, many more sellers who really want to sell will carry some of all of the paper on their property to effect a sale.
