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If interest rates return to a "normal" level, this could lead to problems with house prices. What's more, the interest rate will rise again. The US Federal Reserve reacted to a all-time low with a rise in lending rates when the low point in 2007 dropped out of the real estate markets.
These very low interest rates were helping the residential property markets get back on their feet by making it less expensive for purchasers to own a home. Starting this summers, the mean retail prices of a single-family home have made up for all the land that had been damaged by the breakdown. Now when interest rates go back to more normal levels, the costs for purchasing a home will also go up.
This could increase the pressures on house values, which have fallen by more than 50 per cent since they bottomed out in early 2012. In order to see how interest rates could affect pricing, property advisor John Burns quoted figures suggesting that the interest on a 30-year fixed-rate home loan is slowly falling by up to 6 per cent - from the present 4 per cent median.
Consequently, some very hotspots - such as San Francisco, San Jose, California and Miami - can be more than 20 per cent high. However, in other countries, where house rates have not increased nearly as rapidly, they are still below market value - even if interest rates on mortgages are rising again to up to 6 per cent. Housebuyers, who now include themselves in relatively low rates, can still afford the costs of home work - but much will depend on where you reside.
At the most expensive places like San Francisco, New York, Honolulu, Los Angeles, San Jose and Orange County, California, the costs of purchasing a home can account for half the median wage. Home buyers in more accessible towns, such as Cleveland, Philadelphia, Pittsburgh, Minneapolis, Atlanta and Detroit, can count on spending about 20 per cent or less of their incomes according to his work.