patrick.net

Wouldn't house prices have to drop in the same proportion to sell?

If interest rates went from 4.5% to 9%...

Someone making $150K a year would be able to afford signifcantly less house.... Wouldn't you say someone making $150K a year should be able to afford a 3bed/2bath in an area of Los Angeles with a decent school district?

A 400K home seems a good price point to start at:

At 4.5% interest:

$2556 a month (including PMI insurance and taxes and 3.5% down payment)

At 9% interest:

$3706 a month (including PMI insurance and taxes and 3.5% down payment)

*****

So if interest rates doubled... to a realistic 9% (rates were higher in the 80s and 90s).  A family income of $150K couldn't afford a $400K 3bed/2bath...

The price of the home would have to fall to  $275,000 to come close to the same affordability.  That's a HUGE drop...

This alone should scare anyone from buying right now... If you buy now.. And interest rates climb to 9% in the next 5 years... Your home value will drop dramatically...

This is still very scary, are Americans so bad at math that they don't realize this?

#investing