Ignore all the affordability nonsense. That just tells you interest rates are low.The price you pay for a home is far more important than the prevailing mortgage interest rate, yet Realtors would love for you to believe the opposite. In general, low interest rates simply mean there is low expected inflation. (Financial institutions aren't going to lend at 5% annual interest if they expect money to lose purchasing power at 7% annually.)
Imagine buying a $100,000 house under two different scenarios. In the first scenario, you pay 15% interest when inflation will be 12% annually during the duration of the mortgage. Your real interest rate will be 3% (because 15% - 12% = 3%). Sure, the nominal interest rate is high, but your house will also gain value at 12% per year. By the time you pay off your 30-year mortgage, the house will be worth $3 million.
In the second scenario, you pay 5% interest when inflation will be 2% annually during the duration of the mortgage. Your real interest rate will again be 3% (because 5% - 2% = 3%). Sure, the nominal interest rate is low, but your house will only gain value at 2% per year. By the time you pay off your 30-year mortgage, the house will only be worth $181,000.
Right now the Realtors want you to believe that somehow the second scenario is better for buyers than the first, but it is not. What's worse is that the Realtors actually want you to think that in the second scenario you should be willing to pay substantially more for a home than you would in the first. That's salesmanship.
To paraphrase Warren Buffett, "The price you pay determines your (real) rate of return."
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