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(former)FormerSanDiegan
ParticipantCAR –
I agree that there are many other factors, that is my whole point. You pointed out several, including demographics and other loan conditions besides interest rates. Therefore one cannot conclude that a 1% rate increase results in a X% price decrease. (or that it necessarily automatically results in a price decrease at all).In the 2006 to 2010 time frame, rates declined in the context of declining GDP, growing unemployment, tightening of lending standards, and the gravity of market fundamentals (prices outstripped rents and incomes). It is obvious in hindsight that those factors trumped changes in interest rates.
If interest rates were to rise in the context of a growing economy, declining unemployment, and loosening lending standards, prices may or may not rise.
I am not insisting that rising rates always result in rising prices. I am simply pointing out that rising rates do not necessarily result in lower prices as borne out by the examples above.
People seem to believe in the model of an inverse relationship between prices and interest rates when in reality there is historically as much or more evidence of the opposite being true.
Participant[quote=doofrat]Thanks FSD. I hadn’t thought about the fact that the payment is the same each month over the life of the loan, so the effect of the interest portion of the payment is spread across so many years.[/quote]
No problem.
Also note that as the interest rate increases, so does the tax-deductible portion of the payment. SO the impact of an increase from 4-5% may be less than the 12% increase in before tax payment posted above. (but depends on individual situations).Participant[quote=doofrat]Thanks FSD. I hadn’t thought about the fact that the payment is the same each month over the life of the loan, so the effect of the interest portion of the payment is spread across so many years.[/quote]
No problem.
Also note that as the interest rate increases, so does the tax-deductible portion of the payment. SO the impact of an increase from 4-5% may be less than the 12% increase in before tax payment posted above. (but depends on individual situations).Participant[quote=doofrat]Thanks FSD. I hadn’t thought about the fact that the payment is the same each month over the life of the loan, so the effect of the interest portion of the payment is spread across so many years.[/quote]
No problem.
Also note that as the interest rate increases, so does the tax-deductible portion of the payment. SO the impact of an increase from 4-5% may be less than the 12% increase in before tax payment posted above. (but depends on individual situations).Participant[quote=doofrat]Thanks FSD. I hadn’t thought about the fact that the payment is the same each month over the life of the loan, so the effect of the interest portion of the payment is spread across so many years.[/quote]
No problem.
Also note that as the interest rate increases, so does the tax-deductible portion of the payment. SO the impact of an increase from 4-5% may be less than the 12% increase in before tax payment posted above. (but depends on individual situations).Participant[quote=doofrat]Thanks FSD. I hadn’t thought about the fact that the payment is the same each month over the life of the loan, so the effect of the interest portion of the payment is spread across so many years.[/quote]
No problem.
Also note that as the interest rate increases, so does the tax-deductible portion of the payment. SO the impact of an increase from 4-5% may be less than the 12% increase in before tax payment posted above. (but depends on individual situations).Participant[quote=Doooh]You sound like an X girlfriend. One extreme or the other, there was no in between.[/quote]
There is plenty of in between. You are the one suggesting a direct correspondence between interest rates and price, not me.
If it is somewhere in between, then there must be other factors. I agree with that.
Furthermore, the magnitude and direction of these other factors is often larger than the impact of interest rates as evidenced by the examples posted above.
P.S. – You never know. I might be your x girlfriend. (Did she have a beard ?)
Participant[quote=Doooh]You sound like an X girlfriend. One extreme or the other, there was no in between.[/quote]
There is plenty of in between. You are the one suggesting a direct correspondence between interest rates and price, not me.
If it is somewhere in between, then there must be other factors. I agree with that.
Furthermore, the magnitude and direction of these other factors is often larger than the impact of interest rates as evidenced by the examples posted above.
P.S. – You never know. I might be your x girlfriend. (Did she have a beard ?)
Participant[quote=Doooh]You sound like an X girlfriend. One extreme or the other, there was no in between.[/quote]
There is plenty of in between. You are the one suggesting a direct correspondence between interest rates and price, not me.
If it is somewhere in between, then there must be other factors. I agree with that.
Furthermore, the magnitude and direction of these other factors is often larger than the impact of interest rates as evidenced by the examples posted above.
P.S. – You never know. I might be your x girlfriend. (Did she have a beard ?)
Participant[quote=Doooh]You sound like an X girlfriend. One extreme or the other, there was no in between.[/quote]
There is plenty of in between. You are the one suggesting a direct correspondence between interest rates and price, not me.
If it is somewhere in between, then there must be other factors. I agree with that.
Furthermore, the magnitude and direction of these other factors is often larger than the impact of interest rates as evidenced by the examples posted above.
P.S. – You never know. I might be your x girlfriend. (Did she have a beard ?)
Participant[quote=Doooh]You sound like an X girlfriend. One extreme or the other, there was no in between.[/quote]
There is plenty of in between. You are the one suggesting a direct correspondence between interest rates and price, not me.
If it is somewhere in between, then there must be other factors. I agree with that.
Furthermore, the magnitude and direction of these other factors is often larger than the impact of interest rates as evidenced by the examples posted above.
P.S. – You never know. I might be your x girlfriend. (Did she have a beard ?)
Participant[quote=Doooh]Your examples were based on years of change. The reality of the current example we’re in was based on 1 month. Let me repeat it again… 1 month and the 30 year saw a 1% increase!
The examples you presented are irrelevant to the reality we’re sitting in this month.[/quote]
OK. Then we should see a 10% decline in one month.
Participant[quote=Doooh]Your examples were based on years of change. The reality of the current example we’re in was based on 1 month. Let me repeat it again… 1 month and the 30 year saw a 1% increase!
The examples you presented are irrelevant to the reality we’re sitting in this month.[/quote]
OK. Then we should see a 10% decline in one month.
Participant[quote=Doooh]Your examples were based on years of change. The reality of the current example we’re in was based on 1 month. Let me repeat it again… 1 month and the 30 year saw a 1% increase!
The examples you presented are irrelevant to the reality we’re sitting in this month.[/quote]
OK. Then we should see a 10% decline in one month.
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