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People do not buy houses based on price but upon payment of a mortgage that fits their relatively fixed income. People who can afford to pay $2K mortgage to li
by VLM 4y ago
People do not buy houses based on price but upon payment of a mortgage that fits their relatively fixed income.
People who can afford to pay $2K mortgage to live in a X percentile house will continue to pay exactly $2K to live in the same X percentile house. What does change when the interest rate varies is cap gains/losses for everyone involved. There are also some transactional fee variations, obviously a 3% real estate agent commission will be more on a $500K sale than a $250K sale, but the monthly mortgage payment will remain identical. Also fixed transaction costs (inspections, certain taxes and near-taxes) will be a higher percentage of the sale price.
My prediction would be the transactional fee middlemen will demand higher percentages to maintain their revenue stream as interest rates rise. They're certainly not providing any additional value, so I would imagine there will be more competition among middlemen, opportunity for startups to disrupt the market, etc.
- dwater 4y agoI haven't worked in the home sales/mortgage industry, but I bought a house in 2006 and what I remember was the huge number of people getting into the industry in the boom years and then a mass exodus after the crash. It felt like everyone who didn't already have a good career was getting a realtor's license in 2006. I would expect this go around to be similar, they may want to raise their fees to account for dropping prices, but there are probably too many others trying to compete in the market for a slice of the shrinking pie to let that happen.