Posted by John V, FL on July 29, 2003 at 13:04:12:
Any asset or equity in an asset is really worth the current value of future cash flows it will generate. Most of the pool of buyers uses leverage to buy so the cash flow would be negatively impacted by higher mortgage payments. Higher interest rates means a buyer down the road would have to discount the price in order to buy a property if every other variable remained the same such as rents, operating expenses and estimated future appreciation. As so much of this latest boom in housing was due to lower interest rates it should adversly impact it the other way.