09-19-2010 07:53 AM
Interesting article in the oc register from lansner about the past trend of rising interest rates causing home prices to rise, contray to what many would think. Whatever it takes to get home prices going up again, I'm ok with it. I think we are past the bottom.
06-07-2011 02:50 PM
Lansner's article is interesting.
However, changing interest rates have more to do with qualification than with prices. Home prices are market driven.
There is always a basic market developed from family formation, family expansion and contraction, death and birth rates. But the major driver is job formation. If potential buyers can not find work, or can not retain jobs, prices fall. When work opportunities are everywhere, prices rise as consumers gain confidence.
During the late 1980's, I financed a new tract of condos in Diamond Bar. 109 units total, built in four phases. I was the on site lender. When we announced the sale would be held one Saturday morning, there was so much interest we started a reservations list. There were over 200 people on the list the first day. The first phase was to be 30 homes.
On the sale date, people were waiting an hour or more - standing in construction dirt - before the sale began. Names on the waiting list were taken in order. After the 15th buyer, we raised the price $15,000 and sold the remaining units the same day to the same crowd. Rates, by the way, were double digit. 11% to 12% for fixed.
That is the effect of demand.