watchinclose

The Case for Higher Interest Rates and Lower Home Prices

Two points: 1) The mortgage calculator used assumes that the 1.5% property tax will be assessed on the sales price. Reducing the sales price by $54K contributes $67.50/mo to the payment reduction. Alas, most property taxes are based on assessments done periodically and are not updated for actual sales transactions so the $308/mo reduction claimed for the sales price cut will be only $240.50. 2) if both the price and interest rate are reduced by 18% (to $246K and 4.5%) the monthly payment goes down $126 more than if only price declines. Affordability and housing demand will be higher with lower interest rates. At the margin, houses can sell at slightly higher prices if interest rates are lower.