[quote=Rich Toscano]First, the steepening curve where as interest rates get lower, they exert a continually higher impact on affordability – that is something I had never thought about. That could be an important piece of the puzzle. I’d always observed that in the past, interest rates didn’t have such a big influence on valuations, but they seemed to have more of an impact more recently. This might be a result of the non-linear impact of rates — they didn’t matter so much when they were higher in the past, but matter a lot more now. Must think about it more.[/quote]
So mostly for amusement here’s the chart that shows what you could buy with interest rates from -10% to 20%.
This gives you a sense of just how unlinear the curve is. But if you think about it, realistically home loan rates are not likely to go into negative territory and even 10 and above seems extremely unlikely any time soon. So, we are only really interested in the 2-5% range which is comparatively flat against the overall curve.
