Attention: your browser does not have JavaScript enabled!

For full functionality of this site it is necessary to enable JavaScript.
Click Here to learn how to enable JavaScript.

decision point logo
  • Home
  • About Us
  • Subscriptions
  • Blogs and Links
New around here? Subscribe now! Forgot password?

Manage Account

  • HOME
  • ABOUT US
  • SUBSCRIPTIONS
  • BLOGS AND LINKS

How Interest Rates are Squeezing Home Buyers

Published on September 23, 2022 at 11:56 AM by Carl Swenlin

DecisionPoint Alert

I knew well ahead of the 2006-2007 real estate crash that problems were coming, but I didn't really understand the cause. I thought that the price of houses was going to deter buyers, but buyers didn't care about the price of a home, they only cared about "how much a month?" And that, of course, is a function of interest rates -- as rates go down, a fixed monthly payment can buy a more expensive house (and vice versa). It's the 'vice versa' with which we are currently concerned.

Since January 2021, the 30-Year Fixed Mortgage Rate has gone from 2.65% to 6.29% today. Looking at this chart, one has to wonder if the term 'criminal ineptitude' is an appropriate appellation for the Fed. It would seem that the Fed thinks their mission is to prevent anyone from ever feeling any pain. Unfortunately, the Fed's actions simply delay the pain and, in doing so, potentially make it worse.

For most people, the price of the home is irrelevant. They only care about the monthly payment they can afford. The following table assumes a monthly payment of $2015 (principal and interest) and a mortgage amount in 2021 of $500,000. Note that, at the current rate of 6.29%, the the fixed payment can only cover a loan of $325,900 -- 34.8% smaller than in 2021.

There are some people who can afford a higher payment, but they are still going to feel the pinch as rates go higher. This table shows that the current payment is over 50% higher than at the 2021 starting rate. Surely, many of these people are going to postpone their purchase.


Conclusion: Real estate is in a bubble thanks to interest rates being kept unrealistically low for years. Rising rates will put the squeeze on home buyers and, in many cases, they will have to forego their purchase. The result will be that the reduced demand will cause prices to drop. Real estate cheerleaders say that prices won't suffer because "people have to live somewhere." This is true, but they are already living somewhere, aren't they?



Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin

(c) Copyright 2022 DecisionPoint.com


Helpful DecisionPoint Links:

DecisionPoint Alert Chart List

DecisionPoint Golden Cross/Silver Cross Index Chart List

DecisionPoint Sector Chart List

DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules


DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

Blog Archive
Previous Article
Next Article

Contact Us

Email: support@decisionpoint.com

© Proudly created by Alamo City Marketing Solutions

Socialize With Us

DecisionPoint logo

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. None of the DecisionPoint newsletters or web site materials should be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

DecisionPoint does not represent or endorse the accuracy or reliability of any of the information, content, or advertisements contained on, distributed through, linked from, downloaded or otherwise accessed from any of the services contained on this web site or in our newsletters, nor the quality of any products, information or other materials displayed, purchased, or obtained by you as a result of an advertisement or any other information or offer in or in connection with the materials. You hereby acknowledge that any reliance upon any Materials shall be at your sole risk. It is your responsibility to verify from other sources, such as your broker, critical elements of a decision to act. DecisionPoint reserves the right, in its sole discretion and without any obligation, to make improvements/changes to, or to correct any error or omissions in any portion of the Materials.

THE SERVICE AND THE MATERIALS ARE PROVIDED BY DECISIONPOINT ON AN "AS IS" BASIS, AND DECISIONPOINT EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICE OR ANY MATERIALS AND PRODUCTS. IN NO EVENT SHALL DECISIONPOINT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE SERVICE, THE MATERIALS AND THE PRODUCTS.