Question by jack: Home loan interest rates should be high enough to prevent a real estate bubble?
Supply and demand. Low interest rates mean the price of houses is bid up – new entrants to the market in their 20s cant get in.
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Answer by Mention the flag of St David
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3 Responses
Laissez-Faire Guy @ 1:36 pm
High interest rates will have the same effect, as those same people can’t afford the higher payments on the lower priced homes.
A $200,000 mortgage at 5% is virtually the same monthly payment as a $150,000 mortgage at 7.5%.
homerunhitter @ 2:12 pm
It isn’t simply supply and demand. Some builders will sit on their propeerty waiting for the market to recover. Seems like most experts think that will be in 2009. There are some bargains available. But not what you would expect given the roiling in the mortgage markets for the past year or so. You will need better credit and documentation of income and even then the rates will be higher. Additionally, a larger down payment may be required. Tough times for home buyers…the worst is yet to arrive.
Free Thinker @ 2:34 pm
Nice thought, how do you propose to do this???