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I’m not predicting this, but if the Fed has to chase inflation by raising rates that would be very detrimental to housing prices. Heard from a friends dad, he
by Flatcircle 5y ago
I’m not predicting this, but if the Fed has to chase inflation by raising rates that would be very detrimental to housing prices.
Heard from a friends dad, he bought a 1.2 million house in the early 80’s. He had a $10,000 a month mortgage.
Can you imagine? Obviously early 80’s rates were incredibly high, but that’s what high interest rates can do to mortgage payments.
Haven't had rising interest rates in over a quarter century
- nine_zeros 5y agoMost homeowners have fixed rates. A rise in interest rate will only make the house underwater in value and not affect their monthly payments
- Flatcircle 5y agoright, but then new buyers taking out new mortgages at new rates will be unable to afford monthly payments at drastically increased prices. If fed rates ever go back to 5%, which they haven't been since the 90's, then mortgage rates would go to 7 or 8 percent. it's the monthly payments not the price of the house, and if rates go up because the Fed has to chase inflation, then those monthly payments go up, and affordability goes down.
- EpicEng 5y agoExcept that your monthly payment is directly affected by the price of the home. If the fed starting selling bonds left and right tomorrow to get the rate to 5%, those home prices would sink.
- Flatcircle 5y agoExactly my point
- nine_zeros 5y agoNo, when interest rates rise, prices of houses will go down to what people can afford as monthly payments. Principal Price of house amortized + interest = monthly payments If people's income have been increasing,they will be able to afford slightly higher monthly payments but it's all going to be eaten by interest.
- monocasa 5y agoOr even more of the market will eaten up by people paying cash.