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> If interest rates remain the same for a longer period then houses must sell for a price where people can pay their mortgages. No, houses can stay expensive e

> If interest rates remain the same for a longer period then houses must sell for a price where people can pay their mortgages. No, houses can stay expensive even if no one lives in them, as we see in China. Or rents can rise far above affordable levels, as they have, and people can end up paying more in rent than they could qualify for with a mortgage. Or people can take roommates or boarders to afford the higher costs.

robocat 3y ago
Irrelevant whether someone is living in it or not. And I don't think China is a relevant example when discussing mortgages in my country or the US. If the market is driven by mortgages (presuming there are not other reasons why the market is disfunctional) then someone is paying the mortgage (or the opportunity cost of investing cash). The market price mostly depends on how much people are capable (and willing) to spend on interest payments. Somewhat different dynamics in New Zealand because to an approximation our mortgages are all variable so we see house prices shift over a couple of years as interest rate changes (plus our interest rates are often higher than US rates). US 30 year mortgages at a fixed rate mean market prices drop more slowly, but I'm guessing can still rise quickly. Interest rates went up in NZ and two years later property prices are down 10% currently I think (plus sentiment still really matters too). You can still fiddle with terms and a bunch of other free variables, but interest payments are one of the most significant variables. We had an earthquake in my city and uninsurable houses could not get mortgages and the price to buy one of those houses dropped drastically. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=as-is%20by%3Arobocat&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... > Or people can take roommates or boarders to afford the higher costs. I agree with you so much that I already previously mentioned that ("rent or AirBnB rooms") in the comment you are replying to!
- leereeves 3y ago
  You did mention it later but not in the original comment I said wasn't true now: > As interest rates rise, people spend the same amount monthly (on interest payments) but borrow less in total and can bid less on houses. Your later responses only explain (in part) why that's not true.

robocat 3y ago

Irrelevant whether someone is living in it or not. And I don't think China is a relevant example when discussing mortgages in my country or the US. If the market is driven by mortgages (presuming there are not other reasons why the market is disfunctional) then someone is paying the mortgage (or the opportunity cost of investing cash). The market price mostly depends on how much people are capable (and willing) to spend on interest payments. Somewhat different dynamics in New Zealand because to an approximation our mortgages are all variable so we see house prices shift over a couple of years as interest rate changes (plus our interest rates are often higher than US rates). US 30 year mortgages at a fixed rate mean market prices drop more slowly, but I'm guessing can still rise quickly. Interest rates went up in NZ and two years later property prices are down 10% currently I think (plus sentiment still really matters too). You can still fiddle with terms and a bunch of other free variables, but interest payments are one of the most significant variables. We had an earthquake in my city and uninsurable houses could not get mortgages and the price to buy one of those houses dropped drastically. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=as-is%20by%3Arobocat&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... > Or people can take roommates or boarders to afford the higher costs. I agree with you so much that I already previously mentioned that ("rent or AirBnB rooms") in the comment you are replying to!

leereeves 3y ago
You did mention it later but not in the original comment I said wasn't true now: > As interest rates rise, people spend the same amount monthly (on interest payments) but borrow less in total and can bid less on houses. Your later responses only explain (in part) why that's not true.