How Housing Costs Affect Interest Rates

Pretty much any adult with a rudimentary degree of financial knowledge is aware of the impact that interest rates have on housing. Lower rates make monthly payments cheaper and higher rates make monthly payments more expensive on a relative basis. Since nearly all homes are financed, rates impact buyer demand and prices rise and fall accordingly.

What’s far less understood is the impact that housing costs have on interest rates. Let me explain: the cost of shelter is basically a necessary evil. Houses are not a particularly dynamic economic investment yet still represent the largest “asset” that most people own. […]