Tom Ruff’s commentary this month in STAT points out the dramatic impact today’s low interest rates have on mortgage payments.

$200,000 Home

  • June 2006 | Interest Rate = 6.68% | Interest Per Month = $1,113
  • June 2016 | Interest Rate = 3.66% | Interest Per Month = $610

The Recovery

He also talks about the peak (2006) and trough (2011) of home prices and which zip codes have “recovered” the most and the least.

  • Most Recovered = Arcadia and North-Central Phoenix
  • Least Recovered = West-Central Phoenix and the far Northwest Valley.

See Tom’s piece for more details.

Curmudgeon Says

A curmudgeon might say 3.66% mortgage rates are responsible for the “recovery” of home prices and not so much a stronger Phoenix economy.

I’m starting to think we may never see mortgage rates above 6% again in my lifetime and Tom’s example suggests how fragile Phoenix home prices would be if we did see 6% mortgage rates again.

Where’s My Hammer?

But the danger of permanent low interest rates is what happens during the next recession?

The Fed can’t really lower rates any lower. That tool’s all used up.

With a smaller toolkit, it would be harder for the Fed to fight the next recession.