[quote=GH]Just keep in mind that housing prices and interest rates have no relationship
Nonsense! Prices are falling today because at ANY interest rate very few can afford, and there are millions of foreclosures out there dropping prices. Credit scores are all but trashed these days, incomes are off and frankly no matter the spin prices ARE falling. If interest rates were raised to say 15% prices would fall massively as far fewer of the dwindling supply of credit qualified applicants could qualify for $500K at 15% than could qualify at 5%.
Assuming 10% down, your monthly payment incl tax will be ~3,000 /MO at 5% and ~6,200 /MO at 15%, so obviously many can afford the $3,000 payment but very few could afford the $6,200 payment.
This is simple math and not subject to opinion![/quote]
Sorry GH, rates DID go to 15%, in the early 1980s, and housing prices did not “fall massively.” In fact, they didn’t fall at all in nominal terms, though they did in real terms.
That is simple data and not subject to opinion. 🙂
Of course, rising from 5% immediately to 15% would make for a “shock” that did not happen in the early 1980s. But that’s not the premise of your argument… you are stating that as rates (and thus monthly payments go up), prices go down, and the historical data simply does not support this.
Go look at a chart of nominal housing prices in the early 80s to see what I mean (I’m sure I’ve put one up somewhere). And check out the “shambling toward affordability” series to see that rate levels have generally had no impact on housing price expensiveness ratios (they seemed to starting in the 2000s, but that was more due to low lending standards than low rates).
