stats45
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Joined: Dec 27, 2010 16:52:12 GMT -5
Posts: 415
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Post by stats45 on Mar 11, 2011 19:32:26 GMT -5
So, I think I found a rental (yay!), but I have a question about house prices and interest rates.
How much will home prices drop if mortgage rates increase just a couple percent? Even if banks weren't making loans to people with questionable histories or income, historically low interest rates must still really be propping up home values. Looking at the main home price indices, it is clear that home prices are still very high compared to historical averages.
I know some people have been investing in real estate for a while, and I wondered what they and others thought.
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Post by debtheaven on Mar 11, 2011 19:57:55 GMT -5
Stats, I am both a homeowner and RE investor, and I could not answer that question for love or money lol.
It has a HUGE amount to do with where you live. Where I live (very HCOLA) I believe prices will never drop. IMO, at best, once the interest rates rise high enough (they are already rising) prices will just go up more slowly.
In 2010, the RE where I live went up 17.5% IN the big city, and 10% in that city's greater area.
So I have to wonder, why are you so certain that the prices will go down, rather than just stagnate, or even continue to go up?
I do realize that I'm in Europe and you're not. But there are still HUGE regional differences in the US as far as RE prices go. IMO you can't necessarily decide that higher interest rates = lower home prices. You'd probably get better or more pertinent info if you were willing to post where you are thinking about renting / buying. (You may have done that and I just missed it. If so, my apologies.)
ETA: Congrats on the rental find!
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Post by Savoir Faire-Demogague in NJ on Mar 11, 2011 20:17:06 GMT -5
Technically, real estate is a fixed income investment. The value of fixed income assets moves inversely with interest rates. When interest rates are at lows, a buyer can borrow more money and bid more. The opposite is some what true.
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runewell
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Joined: Jan 3, 2011 15:37:33 GMT -5
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Post by runewell on Mar 13, 2011 9:16:13 GMT -5
A $200,000 loan at 5% for 30 years has a payment of $1,074. Move the interest rate up to 6%, 7%, 8% and the payment ups to $1,200, $1,331, $1,468. It's about a 12% increase from 5% to 6%, 11% increase from 6% to 7%, and a 10% increase from 7% to 8%.
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DVM gone riding
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Post by DVM gone riding on Mar 13, 2011 19:17:58 GMT -5
I am sure it will slow down borrowing. What it will do to home prices is anyones guess, a lot of people simply can't sell so most likely selection will decrease and then prices might actually stabilize.
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