
Super low interest rates have allowed today's homebuyers to bid home prices up near peak levels in many areas. This helps lenders recover more capital from the bad loans they made during the housing bubble, which is why the federal reserve is intent on driving mortgage interest rates even lower. As a result of all this artificial stimulus, price-to-income ratios have remained elevated far above historic norms. Unless interest rates are going to remain this low forever, one of three things must happen: either house prices must go down further, debt-to-income ratios must increase, or wages must go up. Higher debt-to-income ratios proved disastrous because borrowers cannot sustain the payments, so that outcome isn't likely. Since the federal reserve will…[READ MORE]