Which is preferable: lower interest rates or lower prices?

[afx114]

Over the weekend at a family get together housing came up. One of my cousins is purchasing their first home, and quickly the family turned to me and asked, “when are you buying?” I didn’t want to rain on my cousin’s parade too hard, so I basically told them I’m going to sit it out for the next year or two and wait for the bottom. Their response: “But interest rates are so low right now and they’re going up! Buy now, idiot!”

I didn’t feel like busting out the calculator, and to be honest I wasn’t really sure how to respond. So my question is, at what point do lower interest rates offset the higher prices? And vice versa, at what point do higher interest rates offset any savings you get from lower housing prices? Is it better to pay a higher interest rate on a $200k house, or a lower interest rate on a $400k house? Where is the sweet spot?

[fm]

You have to remember that the property tax is directly proportional to the purchase price. However, even if the rates are going up, it may be a while before the corresponding price decrease happens. I would think you are looking for the monthly payment to either stay at the same level (a balance of the cost versus interest) or drop.

[fm]

You have to remember that the property tax is directly proportional to the purchase price. However, even if the rates are going up, it may be a while before the corresponding price decrease happens. I would think you are looking for the monthly payment to either stay at the same level (a balance of the cost versus interest) or drop.

[fm]

You have to remember that the property tax is directly proportional to the purchase price. However, even if the rates are going up, it may be a while before the corresponding price decrease happens. I would think you are looking for the monthly payment to either stay at the same level (a balance of the cost versus interest) or drop.

[fm]

You have to remember that the property tax is directly proportional to the purchase price. However, even if the rates are going up, it may be a while before the corresponding price decrease happens. I would think you are looking for the monthly payment to either stay at the same level (a balance of the cost versus interest) or drop.

[fm]

You have to remember that the property tax is directly proportional to the purchase price. However, even if the rates are going up, it may be a while before the corresponding price decrease happens. I would think you are looking for the monthly payment to either stay at the same level (a balance of the cost versus interest) or drop.

[Eugene]

His thinking is: “interest rates are going up, therefore monthly payments will go up as well”. I think it’s inaccurate. Interest rates may go up, but prices must go down to compensate, to keep the house affordable to you.

Assuming equal monthly payments, of course it’s better to buy when rates are high and prices are low, for a number of reasons.

[Eugene]

His thinking is: “interest rates are going up, therefore monthly payments will go up as well”. I think it’s inaccurate. Interest rates may go up, but prices must go down to compensate, to keep the house affordable to you.

Assuming equal monthly payments, of course it’s better to buy when rates are high and prices are low, for a number of reasons.

[Eugene]

His thinking is: “interest rates are going up, therefore monthly payments will go up as well”. I think it’s inaccurate. Interest rates may go up, but prices must go down to compensate, to keep the house affordable to you.

Assuming equal monthly payments, of course it’s better to buy when rates are high and prices are low, for a number of reasons.

[Eugene]

His thinking is: “interest rates are going up, therefore monthly payments will go up as well”. I think it’s inaccurate. Interest rates may go up, but prices must go down to compensate, to keep the house affordable to you.

Assuming equal monthly payments, of course it’s better to buy when rates are high and prices are low, for a number of reasons.

[Eugene]

His thinking is: “interest rates are going up, therefore monthly payments will go up as well”. I think it’s inaccurate. Interest rates may go up, but prices must go down to compensate, to keep the house affordable to you.

Assuming equal monthly payments, of course it’s better to buy when rates are high and prices are low, for a number of reasons.

[nostradamus]

It also depends on how much you put down. If interest rates are high but you have a bigger down payment, with a lower price you get a bigger chunk of equity up front.

[nostradamus]

It also depends on how much you put down. If interest rates are high but you have a bigger down payment, with a lower price you get a bigger chunk of equity up front.

[nostradamus]

It also depends on how much you put down. If interest rates are high but you have a bigger down payment, with a lower price you get a bigger chunk of equity up front.

[nostradamus]

It also depends on how much you put down. If interest rates are high but you have a bigger down payment, with a lower price you get a bigger chunk of equity up front.

[Author]

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