I always want to cut to the chase with some figures. The following table shows the monthly payment for each loan amount and interest rate.  A buyer today at 5% interest borrowing $100,000 has a monthly principle and interest payment of $536.82.  If prices deline 5% (and the loan amount does also) and interest rates rise just 1/2 of 1%, then the monthly payment remains almost the same ($539.40).

So if rates go up just 1% to 6%, then prices must drop at least 10% for that same buyer to qualify for the same monthly payment.  Check out the link below:

interestratevspricing0001

The point being is that if you believe that much of the price decline has already happened and you anticipate interest rate increases…and you should.  Why?  Because interest rates are the lowest in recorded history.  But, also at some point, the Fed is going to have to start recouping some of the intense borrowing that has happened to attempt to “jump-start” our present economic slump.  I definitely do not pretend to have the answers, but do have lots of questions.  All the same, the numbers “speak” to me.