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Comment Re:40-year low interest loans (Score 1) 379

Lowering interest rates causes house prices to rise, since the total cost of the mortgage (typically principal and interest) is really what matters. If interest drops, then sellers will increase the price of their house, since buyers can afford it.

However, since the house price rises to compensate for low interest rates, the assessed value also rises, and property taxes then increase.

If a house was purchased at historically low interest rates, then chances are interest rates have risen in the 7 years since the house was purchased. Because interest rates have risen, new buyers cannot afford the new price (old price appreciating 4% per year). The original buyer will not make as large a profit when selling.

The ideal scenario for a home buyer is Carter-era interest rates of 16%. After buying a house and watching historically *high* interest rates drop, the home buyer can refinance at a lower rate.

As a potential home buyer, I'm of course quite upset at the govt/wall street's machinations to keep house prices artificially high. What happened to supporting affordable housing?

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