As a buyer you rather want to take out a loan in a high interest rate environment than a low interest rate environment, given that the monthly payment is the same.
1000 usd extra paid towards your mortgage actually makes a difference when the rate is 15% compared to when it is 1.5%
But a lot of people bought in 2024 expecting that to happen.
If you expect rates to come down soon, you can plan to refinance in the future, but that’s a gamble. Rates may not go down, or the value of the house could go down before you refinance, which may make refinancing more expensive depending on how much you owe.
Paying down a high interest mortgage will always have bigger impact on the dollar than paying down a low interest mortgage.
I’m comparing a mortgage with a high rate and lower principal to one with a lower rate and high principal, where the minimum monthly payments are the same and the owner pays the minimum.
A high interest mortgage just means that you pay more total interest over the life of the mortgage. In any case traditional mortgages are front-loaded, so you pay more towards interest up front than you do principal.
An optional extra payment is worth more when interest rates are higher.
Ie. An optional extra payment of 1000$ will pay your 150$ a year in saved interest when the rate is 15% and only 15$ when the rate is 1.5%.
Everything else being equal, optional payments has a higher value, which represent value to the buyer.
Note that the US mostly does fixed rate for life of the loan. Many countries only have ARM (adjustable rates), and those exist in the US as well. If you have an ARM that changes things greatly.
Higher interest rates mean the monthly payment is higher. You need to pay back the principal + the interest.
House prices tend to be "sticky", so that assumption is probably wrong. People who own a house often cannot afford to sell for the current value since it won't pay off their loan and leave enough money left over for a replacement house so they avoid moving. Eventually things get bad enough that they "sell short", but that takes a credit hit so you don't want to do that until the loss is large (and in turn you gain more).
But if you have a 25 year term on a loan for a $500,000
Approx numbers:
5%: $2922 monthly, total paid: $876,885
10%: $4543 monthly, total paid: $1,353,000.
Given a $1500 monthly payment and a 30 year loan (30 year is most common in the US), at 5% loan is $279,400; at 10% the loan is for 170,900.