We are kidding ourselves that mortgage rates are not the problem. Here is why: We are asking today's buyers to pay 15 percent more per month than we asked them one year ago. Entry-level buyers simply cannot afford to make the payment, which is why so many builders are offering loan programs with subsidized mortgage payments over the first few years. Move-up buyers may be able to afford the payment, but the thought of giving up a low-interest-rate loan for a loan that is 15 percent more expensive (plus the additional balance for buying a more expensive home) is a significant psychological deterrent. Our grading system of the economy and the housing market is a "bell curve" model, with statistics at an all-time high receiving an "A," statistics near the long-term average receiving a "C," an...
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