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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I think you might end up screwed, because even as prices are rising, you're not going to have these super low rates forever.  [/quote]

Lower rates are cheaper financing, that's true, as in a $400K loan at 6% is less per month than a $400K loan at 8%. BUT, when the upshift in rates occurs, the PRICES of homes, especially the non-cash market, will decline. This is simple finance math.

Not sure my finance pedantry helps the OP, but the market in metro DC and especially NOVA is driven by the warmongering that's been going on since 9/11. Believe it or not, if Trump were to scale back Middle East warmongering, that might help you see lower prices. HRC seems to be the neocon dream, so her election would keep them rising. Neither of those is a reason to vote for anyone, IMO.

If I were OP, I'd work to enjoy/resign myself to the townhouse. I'd also work on upping my non-home equity savings, probably in shorter (less than 3 years) maturity treasuries. And I'd keep in mind that being a teacher means a much more stable income than most have, even if that income seems smaller![/quote]

You're missing the key fact that interest rates increase when prices are increasing.  The economy would be roaring at the same time should there be a massive increase in rates.  Or simply runaway inflation. I wouldn't count on an increase in rates resulting in a decrease in prices.  It hasn't worked that way in the past. [/quote]

The decrease in prices due to increasing interest rates is finance math. If interest rates rise, ceteris paribus, prices decrease. Talk to a bond trader if you doubt this. Realize that much of the public policy reason for super low interest rates is that most politicians want to keep asset prices high. If  ultra-low rates were jettisoned, asset prices, especially on long-duration assets like homes, would decline and there would be lots of folks, including financial institutions, with capital losses.

Yes, there is a chance that a demand increase is likely to accompany an upward slopping interest rate curve and perhaps that will be a wash for them. In the absence of certainty about these things, I still think the best counsel is to work to increase their savings in nominally safe and liquid assets like short-term treasuries. Short term treasury mutual funds with high correlation with indexes and very, very low fee structures are essentially the same thing.

As for runaway inflation, I'll be happy to discuss that in a minute when I find where I put my tinfoil hat.

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