Asked by Mark, 48307 • Wed Aug 20, 2008
I have heard Realtors say that now is a good time to buy because interest rates will likely go up. Now, I understand that increased mortgage interest rates will increase the share of the monthly PITI payment made up by interest payments. So, if the overall PITI payment stays the same size, the principle payment (and hence the house price that one can afford) must go down.
So far, I think that I understand. But it seems to me that if interest rates rise -- and if buyers can afford less house -- then sellers will have to lower prices in order to sell. After all, if buyers cannot buy houses at current prices, then sellers will have to lower their prices in order to sell.
So, why not think that interest rate increases will be a wash for affordability?
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