If rates are 15-20% what will be the annual increase in rents ? Will they track inflation ? If they are even close, then in that scenario the bulk of the price correction will be in rent increases, not price declines.
In fact, if you believe that we will see 15% rates in the next few years, wouldn’t it make sense to lock in a loan now (even on a 40% overpriced property), if you can lock in 6% and pay back in a 15% interest rate environment. IF you assume inflation and rates roughly track eachother that might mean inflaiton in the 12% range.
At 12% inflation the dollars you borrowed at 6% are worth half as much 6 years later. Even if homes fall in value by 6% in real dollars per year you come out ahead.
Rates jumping 9% and the accompanying inflation over the next few years would not benefit a bubble sitter IMO. That scenario favors the property owners.
