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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: J. P. who wrote (1123)12/6/2001 2:54:44 PM
From: GraceZRead Replies (2) of 306849
 
Are you saying that the asking price for a house with mortgage rates at 6.5% is the same with mortgage rates at 7.5%. Wouldn't that make the monthly payments higher and deter would be buyers?

When rates were rising in California a few years ago did housing prices go down? While it would seem that the two have a direct relationship, they don't, or to be more correct, they do and they don't. People buy today what they believe will be more expensive in the future. While some people will find housing out of their reach if rates rise putting a damper on prices to a certain degree, if their cost of renting goes up higher than owning they are pushed to take assets they would normally put into other areas of investing and put them in real estate.

Another question: If real estate historically appreciates in the single digits annualy, why would double digit gains over the last few years be "sticky"?.

They probably won't be, but you have to realize that while there were certainly areas like Northern California and Seattle where double digit growth occurred for years and we can expect some pull back, other areas of the country were simply making up for years of sub par growth. I sold a house I owned for 10 years at the same price I bought it. Since I sold it three years ago, the area has experienced double digit growth which only brings it up to the low single digit growth over the last twenty years. So in some areas prices will in fact revert to the mean, but taken as a whole, if we have inflation on the horizon as the bond yields suggest, you can expect housing prices to stay firmer than what people are expecting on this thread.
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