2 ms·
The data is out there, but really it's common sense. On the margin, a buyer purchases a house with a monthly payment he/she can afford. The monthly payment is d
by dxhdr 13y ago
The data is out there, but really it's common sense. On the margin, a buyer purchases a house with a monthly payment he/she can afford. The monthly payment is determined based on the purchase price of the house and the interest rate. The higher the rate, the higher the payment. If rates raise, the margin buyer will no longer be able to purchase the same priced house. Prices must fall to clear the market. Yes, increased wages could help make up for the gap. Wages do not have to rise with interest rates (stagflation).
- minimax 13y agoI understand the theory, but when I look at the data it looks like: http://research.stlouisfed.org/fred2/graph/?g=mth http://research.stlouisfed.org/fred2/graph/?g=mth The last real period of rising mortgage rates was in the 70s. You can pretty clearly see that home prices were rising in spite of rising financing costs.
- VLM 13y agoMore like very early 80s. On the other hand, the price of everything more than doubled in the 70s due to stagflation.