Low interest rates and easy loan approvals fueled the fire for the housing price bubble. Human nature is to compare the cost of rent with a comparable house payment. Sounds good, but on income statements the dollar exchange to break even on rental income is the house payment + 36%. A house with a $1000 monthly payment must rent for $1400 monthly to show a profit. $1400 per month rent is not the same as a $1400 house payment.

A home buyer will compare square footage, number of bedrooms, bathrooms, garages, location, etc. to their current dwelling. However, especially if apartment dwellers, they may not consider the cost of maintenance, increases in utility expenses, redecorating, appliances, moving expenses, lawn maintenance, and may not research the value of location by researching comparative value shifts in the area.

Too often calculated monthly payments drove the value of the sales market. The rise in existing and new home prices was in direct relationships with record low interest rates.