Housing prices and interest rates typically have an inverse relationship. The inflation adjusted average monthly mortgage payment has been remarkably constant o

Housing prices and interest rates typically have an inverse relationship. The inflation adjusted average monthly mortgage payment has been remarkably constant over the last 45 years [0], with the exception of: 1. The era of abnormally high interest rates of the early 80s. The greatly reduced demand for housing (and corresponding drop in housing prices) from 1980-1985 was not enough to offset 20% interest rates. Thus, mortgage payments were extremely high. 2. The housing bubble leading up to the 2007 crash. That time, high mortgage payments were due to abnormally high housing prices, not abnormally high interest rates. 3. The current housing bubble [*]. Whether now is the worst time to buy depends on whether rising interest rates will ultimately offset home prices. Home sales have fallen to April 2020 levels [1], but it’s too early to see a corresponding drop in prices. This may not happen for two major reasons IMO: 1. If interest rates rise to levels high enough that their effect on mortgage payments exceeds the corresponding drop in housing prices, à la the early 80s. I personally doubt this. 2. If the likely moderate increase in interest rates fails to cool the market at all. There may be enough cash buyers on the market (primarily institutional investors) that borrowing costs are irrelevant to housing prices. I find this plausible but unlikely. [*] I am very confident that the housing bubble isn’t going anywhere without increasing total housing supply, which hasn’t met demand for the past 15 years, ever since new home construction stalled after the Great Recession (and never recovered). I doubt this will change anytime soon. [0] https://www.motherjones.com/kevin-drum/2017/10/another-look-at-millennials-and-mortgage-payments/ https://www.motherjones.com/kevin-drum/2017/10/another-look-... [1] https://www.census.gov/construction/nrs/pdf/newressales.pdf https://www.census.gov/construction/nrs/pdf/newressales.pdf