Thursday, December 4, 2008

Will Lower Interest Rates Help Home Prices?

I agree with CR about 90% of the time, but I think he’s off on his post yesterday about House Prices and Interest Rates. His argument is a plan to push home prices up by offering lower rates won’t help much because a rational buyer will realize artificially low rates now will not result in a higher resale value down the road. There might be some buyers who think like that, but I don’t know any. Many people prefer to buy if they can afford it, and interest rates are a key component of that equation. I’ve worked through the math in previous posts here and here.