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I wonder what happens to the housing market. In the early 80's people literally swapped mortgages because getting a new mortgage came with rates >15%. Even if

I wonder what happens to the housing market. In the early 80's people literally swapped mortgages because getting a new mortgage came with rates >15%. Even if rates go back up to only 7.5% what happens to housing prices? It also seems like there may be a massive bubble of hedging in leveraged real estate by big institutional investors. Something like 25% of all purchases are by investors right now. What happens when regular people (who need a loan) can't afford the higher interest rates?

Lhiw 5y ago
> Even if rates go back up to only 7.5% what happens to housing prices? Prices go down 40-50%? Normalizing for household leverage and disposable income, a 3% mortgage in 2021 is close to a 6% mortgage in 2007. Assuming it scales linearly (not sure it does), what you're talking about would mean an equivalent effect of around a 15% rate in 2007 against 2007 prices. I tried to track down where I saw these slides but couldn't find them, I think it was a morgan stanley presentation looking at comparison rates and leverage normalization to predict how bad different rises in rates would be in terms of how the rate "feels" to the average mortgage holder.