You pointed out that from the seventies to the 2000s the interest rates hovered between 10% and 13% for a 5-year term.
You pointed out that from the seventies to the 2000s the interest rates hovered between 10% and 13% for a 5-year term. So, if we can have rising prices with those kinds of high rates, why can’t history repeat?
So, yes rates are important because they affect mortgage payments (as in higher) and fewer people qualify at higher rates, important!? Fewer buyers, less pressure on existing stock. But there are two other aspects:
- The speed of increase of rates…if rates rise over a few years, we get used to it (the boiling frog theory) and we adjust. Markets go sideways.
- The key is Psychology of the marketplace. Both on the way up and on the way down! Imagine someone told you there would be 45 offers and the winning bid is $300,000 over ask?! Yet, it DID happen.
Psychology? ‘FOMO’ and then expectation ‘make more money if we get in now’. As long as buyers think prices are rising, they find a way to make payments!
Psychology on the way down? If they don’t believe anymore, they run! And fast! This is happening shortly…Many owners will not believe it and not act until their own fomo/psychology changes.
