gaogi said:
11 years ago, 30 year fixed was around 8%. I would imagine if interest rate start rising, home prices will fall. If we go back to the 7~8% range that was 11 years ago, I'm hoping prices will also drop back to the level of 2000.
I'm in a kids' movie quoting mood (see my comment on the IHB today), so I have another:
You are too concerned about what was and what will be. There is a saying: yesterday is history, tomorrow is a mystery, but today is a gift. That is why it is called the "present."
- Master Oogway in Kung Fu Panda (supposedly originally from Bill Keane)
What I'm trying to say is even the best fundamentally educated mind can't accurately predict interest rates. 3 years ago, everyone said interest rates would go up... instead they've gone down. It seems logical that at record lows, they should go back up but when and how high... and will the prices really drop proportionately? Over on the OCReader, Lloyd Dobler had this to say:
Lloyd said:
I think it's a fallacy based on observed behavior when rates decreased, meaning that as rates were falling people were buying and refinancing in order to take advantage, leading to an increase in purchases and the subsequent increase in demand drove prices higher.
If prices rose when rates fell, then the opposite must be true... right?
No. Interest rates rose sharply during the 70's and 80's and yet the historical record shows that new home sales were unaffected by the fluctuation. in fact, new home sales more closely tracked the ebb and flow of the economy, indifferent to interest rates.
http://ocreader.com/forum/viewtopic.php?p=14039#p14039
The 4.x% thread here seems to indicate that we might be at these levels for a while... the funny thing is... we've been at these mid 4 to mid 5 rates for about 3 years now yet prices are still going down... so they aren't the only factor in making prices go lower.
