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> I was astounded when my father mentioned recently that when they bought the home I grew up in, the interest rate was 12%! The prices of houses adjust very qu
by parineum 5y ago
> I was astounded when my father mentioned recently that when they bought the home I grew up in, the interest rate was 12%!
The prices of houses adjust very quickly to changes in interest rates because housing prices are based on what an "affordable" mortgage payment for the market is. Housing prices change to make that math work.
Interest rates and housing prices only matter to people who are buying a house that aren't selling one at the same time. Low interest rates are bad for first time home buyers and investors.
> The "don't buy a home mortgage for more than 2x-3x you annual salary" was advice formed at a time of much higher interest rates.
Also, when that adage was coined, the cost of the "essentials" required to live hasn't gone up as much so people have more of their income to spend on housing.
- ineedasername 5y agoTrue: people can afford $X/month. The proportion that goes towards interest is less relevant. In fact, I'd prefer a lower sticker price & higher interest rate to get to $X. That way when interest rates inevitably drop at some point I can refi at the lower rate and get the partial benefits of both lower sticker $ and interest %.
- quadrangle 5y agoLow interest rates and high price is also quite simply a huge profit for existing homeowners at the expense of new homeowners, all pushed by banks. It's almost as if macroeconomics is a real topic after all! /s