Home Price to Income Ratio

Re:Home Price to Income Ratio by zzleeper on Monday September 20, 2021 @12:16PM (#28595445)

I just got a 15yr fixed rate at 2% (!) which made me think a lot about what's behind your comment. In particular, what will happen once rates go back up:

1) Right now we are at zero short term rates, and moreover mortgage rates are propped due to Fed purchases of Agency MBS

2) Say rates go up 2% (not crazy) in parallel. So now your 3.5% becomes 5.5% which is still historically moderate. However, the 5441 required monthly income from your formula is now 6877! 26% increase.

3) What then? Prices go down?

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Re:Home Price to Income Ratio by lbotos on Monday September 20, 2021 @04:01PM (#28598221)

House price is inversely correlated to interest rates BECAUSE most buyers are getting a mortgage. So the price of the house "will drop" (hard and fast estimate here not a law) if interest rates rise because people are paying for house+interest = total_cost_able_to_pay.

I watched this play out in real time as I purchased my home. Rates dropped, prices went up to fill the gap. Owner got a bit more money vs the bank instead.

Basically I gave my money to a different person, but the "all in" was about the same.

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Re:Home Price to Income Ratio by kipchak on Monday September 20, 2021 @03:07PM (#28597494)

Regarding 3 I would figure either prices would have to come down, financial assistance comes from somewhere, or the house winds up being rented after being purchased by a management group.

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