Is a recession coming? Can you afford it?

[Tyler Warne]

As interest rates rise there will be decreased purchasing power. This automatically decreases the amount of house, duplex or whatever we can by (if a loan is required) based on the debt to income ratios that a bank often uses. So how much does it affect us? See graphs below! 

The chart below is of the same thought, just the payment stays the same. Since we are a 'how much is the monthly payment' type of society, the chart shows that this drastically affects the amount of house that we can afford. Approximately a $2400 payment. 

While this does not have a direct impact on the psychology of a buyer, it removes a purchaser from the market, or a price range, which will lower demand and (economic magic) will lower housing prices. 

Why is this not the end of the world? Well when you bought, money was cheap, and your payment is still likely lower or similar to what you can purchase now and going forward. 

[Bob Okenwa]

Rising rates will not be the end of the world. Rates were once in the mid to high teens in the 80s. As the graphs illustrate, purchasing power will come down, and in order to balance the market, home prices should flatten or reduce accordingly as supply and demand work their magic. It may take some time to adjust to the new order, but over time I believe we'll all get used to it. People seem to forget that rates were in the mid 6's before the crash and that was only a decade ago.