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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I think it's cooled off in the sense that people need to come down off their prices. Interest rates are going up. Home pricing needs to reflect that. I think some sellers got really lucking in the spring overpricing their homes. Now it's time to come back down to reality.[/quote]

Home prices aren't affected by interest rates. The two have nothing to do with each other.[/quote]

Of course there is relation between the two.  People can spend X amount on their mortgage.  If interest rates are higher, more of that X will be take up by interest payments which will cut into the amount they can pay for a house.[/quote]

No, silly. That's not how economics work. Are you Rick Perry?[/quote]

That's exactly how economics works.  It may not have a 1-1 impact on prices, but it will absolutely have an impact.

Let's say my income enables me to have mortgage payment of $3,000.  If interest rates are 3% I could borrow a litttle over $700k.  If rates rose to 4%, I could only borrow about $625k.  Assume a 100k down payment.  I could now only afford a $725k house instead of more than $800k.

If I were the only one affected, then it would simply suck for me and I would be stuck with a crappier house.  But, rates will impact all buyers, except those paying cash.  As the vast majority of buyers have their purchasing power reduced by the increase in interest rates, that will create a downward pressure on prices, at least absent some other countervailing market force creating an upward pressure.[/quote]

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