If interest rates were much higher than they are today...

[john_and_marlene 162]

When I bought my first home in 1983, the mortgage interest rate was 13 1/2 % and that was down from much higher rates the previous year.

[rebeccajo 14]

When I bought my first home in 1983, the mortgage interest rate was 13 1/2 % and that was down from much higher rates the previous year.

John -

Do you remember what you paid for the house? And do you have any idea what the 'value' of it might be today?

[rebeccajo 14]

It isn't the rate of interest charged for credit that stops people from buying stuff. It's the price of stuff.

The rate of interest does play a role, a major one! If the rate on a mortgage goes up, the effective monthly price of the home is up, and people wouldn't be able to afford to buy it.

I disagree to think that its "not painful" to pay 3-4% more on a home/car loan. With the credit market dried up now (at even the below 6% rates), try raising to 9-10% and barely barely anyone would qualify for a loan, and hence totally stall the market.

Interest rates are key, hence why the Fed dropped theirs today.

I said paying a higher interest isn't as relevant if the price of the good is reasonable.

Lower interest rates are necessary when prices are outpacing earnings.

[john_and_marlene 162]

When I bought my first home in 1983, the mortgage interest rate was 13 1/2 % and that was down from much higher rates the previous year.

John -

Do you remember what you paid for the house? And do you have any idea what the 'value' of it might be today?

I have no clue what it's worth today. I do very well remember what I paid for it and how much I sold it for in 1987.

First, the house was in Austin, TX. (Austin TX experienced severe housing devaluations in 1987)

I paid 47,000 in early 1983. In 1986 a market analysis indicated the value of the house was around 65,000. I was thrilled when I sold it for 47,000 in 1987. In my neighborhood, many people walked away from their mortgages. I was only able to get the price I did because of improvements I had made.

Edited October 10, 2008 by john_and_marlene

[rebeccajo 14]

When I bought my first home in 1983, the mortgage interest rate was 13 1/2 % and that was down from much higher rates the previous year.

John -

Do you remember what you paid for the house? And do you have any idea what the 'value' of it might be today?

I have no clue what it's worth today. I do very well remember what I paid for it and how much I sold it for in 1987.

First, the house was in Austin, TX. (Austin TX experienced severe housing devaluations in 1987)

I paid 47,000 in early 1983. In 1986 a market analysis indicated the value of the house was around 65,000. I was thrilled when I sold it for 47,000 in 1987. In my neighborhood, many people walked away from their mortgages. I was only able to get the price I did because of improvements I had made.

Ah. Well, your 'resale' situation wasn't the 'norm' for life in the US back then, I guess.

I'm sure the house is worth far more than 47K now.

And that's the point i was making when I said higher interest rates don't matter quite so much when the price is more realistic. We were all affording houses at 12-14% 'back in the day' when they didn't cost as much as they do now.