Mortgage rate movements slowly push people out of the market. Dramatic rate moves push more, but rates typically trickle up/down 1/8th or 1/4 pt.
Even at our highly leveraged point, a 1/2 pt. move only requires an extra $140/month. If the seller gives a little (2.5%) and the buyer sucks it up a little ($50/month) you get the same payment. IMHO, the bulk of people buy based on payment, not potential capital outlay.
Interest rates can move from 6.5% to 8.5% and long term payment after taxes are the same if the price comes down 10%. In my experience, people aren’t going to overly quibble about an extra $50/month on a payment that is already $2600. If interest rates rocket to 10%, a 20% price drop puts everything back to par on payments, both before and after income tax breaks.
Interest rate hikes aren’t going to crash the bubble, credit tighening and lack of appreciation will prevent people from getting 1% loans that will crash the bubble.
