“I’d rather buy a cheaper house with a high interest rate than an expensive house with a low interest rate”
amen to that – high interest rates is one of the things that will cause a real market bottom – as interest rates rise housing prices will drop – at the extreme, interest rates would be so high (mortgages in the 1980s were as high as 21% with 14% being typical) that only cash buyers would be able to purchase real estate (and you can imagine what prices would be like in that environment)
from the bottom caused by high interest rates there is only one direction for real estate to go and that is UP – as interest rates come back down, house prices go back up – the cash buyer gets a mortgage and pulls his equity out to buy more housing in the now rising market – others refi into less expensive mortgages
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as to how long these rates are sustainable: how long can the Fed and our govt continue buying US bonds? when foreigners stop buying US bonds completely (they have already slowed down dramatically) the only buyer will be the Fed – will that be sustainable? at some point people will stop participating in the US economy (putting their money into US bonds and equities) because it has become so much of a farce – very hard to say when that will occur but with China and Russia both calling for a new reserve currency backed by gold, the time of US economic hegemony is drawing to an end …
