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> At some point, a lot of home buyers started shopping by payment without regard to total price Isn't this how everyone has always shopped for housing? House p
by nly 4y ago
> At some point, a lot of home buyers started shopping by payment without regard to total price
Isn't this how everyone has always shopped for housing? House prices are just a Present Value calculation. For example, if you can afford $3,000/mo over the next 25 years and you have a copy of Excel or OpenOffice calc handy:
Affordable house price at a 5% mortgage rate: =PV(0.05/12,25*12,-3000,0) => $513K + [your down payment]
Affordable house price at a 2.5% mortgage rate: =PV(0.025/12,25*12,-3000,0) => $668K (30% higher) + [your down payment]
Atm, here in the UK interest rates are basically back to where they were in late 2019, but housing is still priced 20% higher. This is due to the chronic lack of housing stock and shifting buying patterns
- TapWaterBandit 4y agoThe interest rate hasn't even gotten to 1% yet and these things take time to filter through to the market. And it is worth pointing out that as you can see from the link below the UK has had rates at less than 1% since the GFC. https://www.propertyinvestmentproject.co.uk/property-statistics/uk-interest-rate-history-graph/ https://www.propertyinvestmentproject.co.uk/property-statist... I have no idea where interest rates are going to end up however I wouldn't assume that the relevant reference point is late 2019 to now.
- nly 4y agoSure, we've had sub 1% zero rates since 2009, but over that 13 years the cost of housing has tripled. Even going to 2% over a couple of years could be devastating to home equity when people are so leveraged.