ELI5 why there is no chance that home price will go down with higher interest rate?

How I see it: every household has some income level and usually their mortgage payment should not be more than 28% of it. Let’s take some hypothetical family with total income of 200k. 28% rule of thumb brings us to “$4650 max payment for house per month.

With 3% IR and just for examples sake $200k of down-payment could afford 1.1M house (including property tax and insurance).

With 5% IR and even with the same down-payment, max mortgage they can get approval for is $930k. This is 15% less. So how this does not affect home prices if people will not be able to get same mortgages with higher rate assuming they have same income.

submitted by /u/Koljaka
[link] [comments]

How I see it: every household has some income level and usually their mortgage payment should not be more than 28% of it. Let’s take some hypothetical family with total income of 200k. 28% rule of thumb brings us to “$4650 max payment for house per month. With 3% IR and just for examples sake $200k of down-payment could afford 1.1M house (including property tax and insurance). With 5% IR and even with the same down-payment, max mortgage they can get approval for is $930k. This is 15% less. So how this does not affect home prices if people will not be able to get same mortgages with higher rate assuming they have same income. submitted by /u/Koljaka [link] [comments]

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