From Matt Carter at Inman News:
The Mortgage Bankers Association forecasts a more abrupt rise in 30-year fixed-rate mortgage rates, from 5.2 percent during the first quarter to 5.7 percent in the fourth. By the final three months of 2011, the MBA expects 30-year fixed-rate mortgages will average 6.2 percent.
What does this mean if you are waiting for the mother of all recession discount sales? If you believe that a 1% bump in mortgage interest rates is in the cards, you had better be hoping for a more than 10% price reduction to go along with it. Otherwise, you will be no better off.
The California Association of Realtors put together an easy-on-the-eyes summary of the effects of the battling twins — home price and mortgage rate.
California Market Snapshot Mortgage Rates 09 –
The short of it is that more than price affects affordability. Duh.
CAR’s numbers assumed a 20% downpayment. What about the cash-strapped buyer? We will have to wait until early 2010 to get the real skinny on the Federal Housing Administration’s plans for tightening lending guidelines for FHA loans, but expect higher down-payments and larger up-front fees to be coming to an government insured loan near you in March.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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{ 4 comments… read them below or add one }
I have been following this site for a while and think it — and Kris — are great. To add one thought to the price/interest rate tradeoff: paying more for a house means less profit when you sell the house down the line. Buying at a lower price, even if it involves paying a higher monthly payment, might make sense if you plan on selling any time within the next several years.
Levi – You got me there. Great point. If, on the other hand, you are planning on hanging your hat for awhile (which is the growing trend), I am more concerned with the bottom line payment.
I am from the east coast. This blog is nice to learn about your part of CA. Good work.
The other interesting part of this will be to see what effect inflation will have on home prices if you believe that inflation is on the way. Inflation normally means higher home prices but it also means higher interest rates. Higher Interest rates normally means lower prices. It will be interesting to see what in what direction it all goes.