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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Buying a house and sacrificing a really low mortgage rate for the current rates  which are so much higher. Any reassurance that the rates should come back down again? Even to 4% or so? Excited about the house but the rate is painful. [/quote]

Rates are indeed painful right now.  Can you you use it to your advantage and offer lower on the house?  That’s what we did.  [/quote]

The price of a home has nothing to do with interest rates on a mortgage.[/quote]

That’s not true — if rates go up enough that buyers can’t afford current prices at current loan rates, prices will have to fall. It’s just that that’s an aggregate phenomenon and not an indicator that you can bid low on the particular house you want to buy. But the basic idea that raising rates will lower home prices is a significant part of the reason the Fed is raising rates. [/quote]

This is just your intuition. The empirical evidence suggests otherwise. You seem to believe that prices will move down in lockstep with rising rates. But there are many reasons that won't happen. First, incomes increase as well in this scenario (and they have), which also affects affordability. Second, not everyone needs a mortgage. There are a lot of cash buyers out there. Third, even those who need a mortgage get creative to make things more affordable -- 40- and 50-year amoritzations, etc. A wise financial decision? Of course not, but it happens. We see this already in cars -- 7-year loans are increasingly common (again, stupid to take and will certainly create macroeconomic problems down the road, but it's helping cars get sold now). And fourth, people just buy less house.

Housing prices simply are not as elastic as you seem to think they are. But the biggest problem with the mentality you have is that you seem to think a buyer *deserves* a lower price because rates have risen. That simply isn't the case. It doesn't work that way. [/quote]

It's not my intuition. The chairman of the Fed has specifically said one goal of raising interest rates is to tamp down housing prices. Rising rates lowers demand, because some buyers can't afford the payments at current prices and the new interest rates. Eventually, in the aggregate, that should drive prices down.

The "mentality I have" has nothing to do with it. I bought the house we live in nearly five years ago; its value is up more than 30 percent since then, somewhat absurdly, and I have a 30-year mortgage at less than 3 percent. At any rate, I have no intention of moving or buying another house for at least 15 years.

If anything, I would be better off if, in fact, prices never go down. But just because I'd be better off if doubling mortgage interest rates had no effect on home prices doesn't make it true.[/quote]

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