pri_dk – You are right, there not much of a correlation between home prices and rates. (Nominal rates anyway… it occurs to me that I need to do a correlation between prices are real rates — but I digress).
Anyway, while there is not a great historical correlation, each time period is different, and I could see a scenario where rates could actually hurt prices. It kind of depends on what’s driving rates… if it’s wage-driven inflation, that might not be so bad; if it’s a run on sovereign debt (and/or mortgages), I think that could definitely hurt prices because you wouldn’t have the offsetting wage inflation.
But this actually doesn’t really matter. Even if rates went up but home prices didn’t go down, I’d still be able to offer a lower-than-market rate, which would presumably increase the market price for the home from what it would have been with a non-assumable loan.
If you look at it that way, you’re right, it’s more a “derivative” than it is insurance.
But, I think that a rising rate environment which is driven by decreasing confidence in govt debt would be just a generally bad environment for housing, both from the direct rate rise and indirectly from the negative economic effects — so I see an assumable loan as providing some protection against that potential outcome.
