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A common misconception amongst novice home buyers is - “its a great time to buy - the rates are so low!”
In fact, as Calculated Risk explains, a rational buyer should be doing exactly the opposite:
A rational buyer wouldn’t pay more just because the interest rate is lower - although they might have to pay more because the demand is greater. But the current buyer wouldn’t pay much more, because the rational buyer would realize interest rates will probably not be artificially low when they try to sell, and their future buyer would have a higher interest rate and a lower price.
So is it possible to have falling mortgage interest rates and falling real estate prices ? Absolutely, and that is exactly what’s happening now!
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