[quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.
Generally speaking, there has been very little historical correlation between rates and housing expensiveness.
That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).
Rich[/quote]
Rich,
I have heard your assessment of the situation with regard to the high rates in the 80’s before.
Can you see it possibly being different this time around based on three factors which to me come to mind?
1) The higher debt load of the average US consumer and home buyer
2) The reduced savings rate nationally
3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.
