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When mortgages are expensive, down payments buy more. Except in the short-term it appears that falling interest rates simply raises the nominal price of housin
by lumost 5y ago
When mortgages are expensive, down payments buy more. Except in the short-term it appears that falling interest rates simply raises the nominal price of housing until it reaches the buyers ability to pay the monthly price + down payment.
Increasing interest rates erodes buyers ability to borrow, which will require prices to fall.
- errantmind 5y agoTrue, but higher housing prices also impede people who save their money instead of taking on 30 year debt. I would definitely prefer higher interest rates and cheaper housing for that reason.
- lumost 5y agoagreed, at the margin there are buyers with a virtually unlimited ability to borrow. If interest rates stay low for long enough I'd expect the majority of housing to be owned by hedge funds and investment banks.