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That's true from a point in time perspective. However, higher principal cost and lower interest means there's inherently more downside risk to purchasing a home

That's true from a point in time perspective. However, higher principal cost and lower interest means there's inherently more downside risk to purchasing a home. We're already at 0% fed funds rate. I don't think the financial system can continue to function beyond slightly negative rates, which limits how much further they can go from here, but we'll have to see. Intuitively, why would somebody make a loan where they have to pay the other person? It only really works if you assume rates will go even more negative, thus increasing the value of the debt in relative terms. Or if lenders can still net a positive return via fees etc. But I need to study how it's working in some European countries. Doesn't seem logical or sustainable on the face of it. Also, keep in mind, rates were around 2% in the 1940s. The long term trend in the past few decades has been down, but the trend was up for a few decades before that. It could very well be that remote work leads to higher inflation by unleashing all the coastal high earners on lower cost of living areas, creating secular price increases across the country. But need to analyze the effects more.

nemo44x 5y ago
If you treat a home as an investment then yes, interest rates moving the wrong way would hurt you. However, if you plan on living in a house for years it doesn’t really matter. Once you’re in the market, a sort of housing relativity begins in that if your home loses value, then others in your market did too so if you sell to buy a different property, it has been normalized. So long as you aren’t leveraged too far. Regardless, over time inflation will probably dwarf your mortgage payment and in due time your monthly payment is “cheap” compared to rents or similar properties + you have equity. But with rising rates the monthly payment will be the same, inflation adjusted, but now more goes to interest than principal. Seriously, look up housing prices and interest rates over the years and calculate the monthly payment. Then adjust for inflation. Hasn’t changed in most places. Interest rates could go up, sure. I just doubt it. I don’t think remote work will have too big an effect on leveling cost of living though. Most places are simply not attractive enough for high earners to desire. A high priced, lovely suburb of NYC is going to always be expensive because there will always be demand to live near NYC for example. Of course interest rates going up + deflation would be disaster for most everyone in the market.

nemo44x 5y ago

If you treat a home as an investment then yes, interest rates moving the wrong way would hurt you. However, if you plan on living in a house for years it doesn’t really matter. Once you’re in the market, a sort of housing relativity begins in that if your home loses value, then others in your market did too so if you sell to buy a different property, it has been normalized. So long as you aren’t leveraged too far. Regardless, over time inflation will probably dwarf your mortgage payment and in due time your monthly payment is “cheap” compared to rents or similar properties + you have equity. But with rising rates the monthly payment will be the same, inflation adjusted, but now more goes to interest than principal. Seriously, look up housing prices and interest rates over the years and calculate the monthly payment. Then adjust for inflation. Hasn’t changed in most places. Interest rates could go up, sure. I just doubt it. I don’t think remote work will have too big an effect on leveling cost of living though. Most places are simply not attractive enough for high earners to desire. A high priced, lovely suburb of NYC is going to always be expensive because there will always be demand to live near NYC for example. Of course interest rates going up + deflation would be disaster for most everyone in the market.