Home prices HAVE to drop at least another 20%

Discussion in 'Economics' started by peilthetraveler, May 29, 2009.

  1. This is the math.

    A 200k home at todays 5% interest has a payment of $1,073

    When interest rates go up to 7% you will only be able to afford a house (if you want the same payment, that is) that costs $160,000(actually $161,400 to be more exact)

    If interest rates go to 8% then its down to $146,000 if you want the same $1,073 a month payment.

    Luckily for us though this 20-30% drop is alot less in terms of dollars than when the median home price was like 300k (or 550k in CA) But this will still be enough to break a few more banks.

    What are your thoughts?
  2. That is statistically true. Your bigger concern should be increases in property taxes and crime regardless of where you live. :eek:
  3. well technically if property values are going down, you can get them re-adjusted so they would actually be cheaper. I'm paying about $200 per month for my property taxes right now, so even if taxes did go up, it wouldnt kill me. But about the crime...you are right. I think about that all the time.
  4. Having been a cop for 12 yrs, I can say that the majority of crime is really crime-on-crime.
    iow, criminals preying on criminals.
    Home invasions do concern me tho.
  5. Podimer


    considering the huge difference the interest rates will make as they rise (and of course, they will), if you happen to be in an area like Vegas or Orlando where the bubble has already exploded and prices are cheaper than dirt (ok, detroit is cheaper than dirt, orlando is the same as a loamy dirt), it makes sense to buy now though it could always go down further. the question may be, is the possible further decline more than the difference made by the increase in monthly mortgage payments from increasing rates?
    then again, the interest rates should rise slower than the decline in prices, which in the past year, have been off a very steep cliff. so maybe wait until Orlando is reduced to fetid swamp muck prices?
    just like any investment, where is that confounded bottom?
    i'm not too worried about increased crime, though with more and more homeless and unemployed, it is a given.