So I ran a simple scenario.
"I am curious about increasing interest rates and how they will affect when the bottom is called. How cheap does the house have to be to offset increasing interest rates? "
A $200k loan at 5% interest over 30 years gives a monthly payment of $1074.
If interest rates increase by 1% (a 20% increase) then the same $1074 payment only gets you a $179,134 loan. That's a 10.4% decrease.
So if the bottom of the market is driven by buyers who are buying the max they can afford, and assuming lenders actually go back to the days of the 28/36 rule (PITI no more than 28% of your monthly gross income, total dept no more than 36%) then if interest rates rise 1% it will theoretically drive down prices approximately 10%.
The reader had another comment:
"I remember Portland housing costing as low as $10,000 in the Alberta Arts district. (1990). A nice house in Hawthorne could be had for $60,000 around that time. Of course interest rates were around 21% and no one could afford the payments back then."I'm pretty sure that 21% interest was back in the early 80's but that's not the point. If interest rates did rise that high again, then that $200k loan suddenly plumments to $61k. That's a scenario nobody wants, not buyers or sellers.