Q&A: If home value are inflated now, how will Americans be able to afford to mortgage if interest rates go up?

Question by The Patriot: If home value are inflated now, how will Americans be able to afford to mortgage if interest rates go up?
Will home values need to drop further?

Best answer:

Answer by linkus86
Home values are not inflated now. Prices have dropped drastically in many markets. But you are right that home affordability will become more difficult when the interest rates rise (and they will start doing so in about a year). When the economy bounces back many will be making more money allowing for a home purchase, but only those with really good credit will be given the opportunity.

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3 Comments → “Q&A: If home value are inflated now, how will Americans be able to afford to mortgage if interest rates go up?”


  1. Caveat Emptor

    Aug 18, 2013

    The key to affording mortgages will be job recovery.


  2. godged

    Aug 18, 2013

    In most markets, home values have adjusted back to values before the big run ups in price that happened in 2003 – 2006. In many markets, values are probably bottomed out, or are darn close to bottom. I doubt we are going to see much more reduction in home values, as many markets are finally starting to show signs of stabilization.


  3. Mike

    Aug 18, 2013

    Great question, although inflated is too general a term. Some markets, like most of Florida and all of Las Vegas are down right cheap right now.

    As far as rates go, by any measure, rates are being held down artifically by the governments current monetary policy. Once, if, or when the economy starts to recover rates will rise like helium. With all the printed money floating around right now, rates will have to rise to thwart runaway inflation. I’m not too optimistic about housing prices in 5 years. I would, however, borrow as much as I could afford at current rates, save that money, and buy more rental RE on the dip.


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