A recent "The Indicator from Planet Money" podcast episode "Rising Rates Vs. The Housing Market" explains how housing price declines don't necessarily follow from rising mortgage interest rates.
Sure, I can see that. Without not knowing their argument, I can see the following pressures on sustaining current price levels:
1. Investor money swooping up property for rental purposes.
2. Home owners refraining from selling in a buyers’ market. As long as they are able to make payments on their leveraged debt.
But there is no denying that higher interest rates put a downward pressure on home prices due to debt being more expensive and investment money finding more promising returns elsewhere; i.e. bonds.
Some other downward pressures I could see impacting housing markets are:
1. Lack of wage increases
2.Baby boomers dumping homes on the market over the next decade
3. Insolvent municipal/state public pensions. Money on these IOUs gotta come from somewhere. Bonds and cuts are one way, raising taxes is another.
Yeah, there’s less of a relationship between those than one would think. Slightly related: it’s time to phase out the mortgage interest deduction and plow that revenue into affordable housing.
1. Investor money swooping up property for rental purposes.
2. Home owners refraining from selling in a buyers’ market. As long as they are able to make payments on their leveraged debt.
But there is no denying that higher interest rates put a downward pressure on home prices due to debt being more expensive and investment money finding more promising returns elsewhere; i.e. bonds.
Some other downward pressures I could see impacting housing markets are:
1. Lack of wage increases
2.Baby boomers dumping homes on the market over the next decade
3. Insolvent municipal/state public pensions. Money on these IOUs gotta come from somewhere. Bonds and cuts are one way, raising taxes is another.