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Lower Price vs Higher Interest Rates

Is a buyer better off waiting for the price to drop or locking in a lower interest rate?

Right now interest rates are low.  That is because the Federal Reserve has lowered rates and flooded the market with funds.  But due to looming inflation threats these low rates will be short term.  As soon as we are out of the recession the Fed will quickly raise interest rates.  In my opinon, we have about a year before the Fed starts raising rates.

So the question is whether a buyer is better off waiting for prices to decrease even more or locking in interest rates now before they rise.  Below is a table showing you the math.

Price/Rate 5.75% 6.25% 6.75%
$500,000 $2,917 $3,078 $3,243
$475,000 $2,771 $2,924 $3,080
$450,000 $2,626 $2,770 $2,918

 Based on 30 years P&I only.

A buyer would have to hope that prices fall 10% in order to offset a 1% increase in interest rates.  Naturally there are different opinions on how much prices will drop.  They will drop even more on the new condo market, but existing homes and condos have already dropped significantly and it is doubtful that prices will drop much more.  The bottom line is that is someone is looking for a place to live in now you can show them the math and present an arguement why they should move now while interest rates are low.