[quote=SD Realtor]Dave I think it could be argued that the relationship between housing prices and salaries for a given region would alter the formula you put forth. For the most part I would agree with that formula for most of the country however I think it doesn’t hold up as well for areas with distorted prices. For proportional price hikes the buyers pool shrinks more rapidly in the distorted regions especially as lending standards tighten up.[/quote]
All of that may be true – I don’t disagree. There will always be regional variations for various reasons. I was just pointing out how the math works for the *average* home (think St. Louis). Interest rates don’t move in a vacuum – they are highly correlated with overall price inflation movements over the long term, and inflation has in the past always been highly correlated with changes in overall rents… but that doesn’t mean that this relationship will necessarily hold when and if rates start rising again…
