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How do those graphs support this claim?

• omgwtfbyobbq 7y ago
  It supports them because the inflation adjusted difference in monthly payments correlates very well with the 30 year mortgage rate. As interest rates fall, home values appreciate based on how much of a monthly payment someone can afford, less the effect of recessions and including other things like prop 13. Take Q1 of 1995 for instance. The inflation adjusted home value at that time was ~340, and the interest rate was 9%. In that case, a $340k home would have a $2.7k monthly payment. A $680k home today with interest rates at 3.75% today would have a $3.1k monthly payment, and I believe that most of it's appreciation is because of low interest rates. If housing prices were driven by prop 13, then when interest rates go up, housing prices should stay the same. If housing prices depend on mortgage rates, then they should decrease over time as interest rates increase.