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Sort of - higher interest rates make your monthly mortgage payments higher, so if there's a fixed monthly payment you can afford, higher interest might offset t

• nwah1 4y ago
  That's true, and beyond the simple observation that the two options (mortgages and renting) will maintain a kind of general equilibrium, there is a more complicated issue called the Law of Rent which shows that land value is based on the productivity that is possible at that location, over and above the alternatives. It is for this reason that what you can afford is key. So land prices respond to the amount of disposable income that the potential buyers have. You are right that the affordability on the mortgage side includes interest rates, and it is possible for price changes to purely be making up the difference there. But it could also be a broader phenomenon. If rental prices are falling, it is an indication that prospective buyers and tenants have less ability to afford that land, or that the location provides less value. Either way, a bad sign. But since land is so essential, it responds in such a way that no matter how prosperous a society becomes, it will always adjust to make itself about as difficult to obtain as always. The number of labor hours needed to buy a computer has fallen dramatically. But land values just kind of keep pace with the progress (or regression) of civilization. People who have ownership over the natural world thus get to claim a growing share of the progress of civilization, purely by owning. Even if they only perform idle speculation.