I argue that there are some good reasons for this, but whether you agree with those reasons or not, the fact is that rates have had little influence on prices in the past. You are claiming a correlation (a causality, really) that isn’t there.
[/quote]
“This is big, in my view. Low rates have been a big driver of housing demand, for both investors (who are seeking out yield wherever they can find it) and residents (who are compelled to buy due to the favorable rent-vs-buy comparison enabled by super low rates). This rate increase will almost certainly undercut both sources of demand.”[/quote]
Yes, I’d say I’ve changed my mind. I think that paragraph you quoted overstates the importance of rates, and it definitely overstates certitude, and I wouldn’t write that today.
That said I do acknowledge that rates are a piece of the picture, for sure. And I do acknowledge the possibilities that 1. low rates are helping keep home valuations high and 2. this could continue to be the case for some time.
What I push back against is this idea that monthly payments are all that matter, and that as long as rates are low, high purchase valuations are inconsequential. (Or, that homes are “undervalued” just because rates happen to be low right now).
