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Up to 1997 real home prices were relatively stable. Then madness began
Prices are already waaaaay to high and we have historic low sales and historic low ownership rates.
More expensive mortgages will just end the housing bubble. Not sure why you compare that to the 70’s.
TwoScoopsPlissken saysThe higher the interest rate, which should be tracking inflation, the cheaper the home price.
Except that's not really true. If you look at historical data there is actually a slightly positive correlation between home prices and inflation. Meaning prices rise with higher inflation and fall with low inflation.
Which makes sense. Prices are much more strongly tied to income than to interest rates.
, it's just that if we have inflation now, it's bound to be ugly, due to the amount of debt out there,
LEt's say a couple years from now we have 10% inflation with 7% long term debt available to those with capital and good credit. . This will be an incredible boon to those with a lot of capital (the owners!) . They can buy everything up with low risk. If inflation ends they refinance, if it continues or goes up they win win win.
Correct. If anyone has any questions, ask yourselves why didn't prices tank in seattle 1975-1980 when inflation was rocketing up?
This is why we had cheap food during Reagan years. Businesses could write off their losses through inflation. They wholesale blitz of old stock and clear the way for this years production.
It sure looks like your chart is evidence for me, not for you... the big upswing in home costs happens in the Neoliberal Era,when rates began to drop below 8%.
A $250k house is:
~$1250/month at 4.5% 30-year fixed
~$1950/month at 8.5% 30 year fixed.
That $700/month is a big difference. It means far fewer people would qualify, putting downward price pressure or at least restraining price increases.
Many households make $45k. Much fewer make $72k
OK, please point out when house prices dropped during high interest rate times. That was your thesis.
OK, please point out when house prices dropped during high interest rate times. That was your thesis.
anon_24e57 saysCorrect. If anyone has any questions, ask yourselves why didn't prices tank in seattle 1975-1980 when inflation was rocketing up?
It sure looks like your chart is evidence for me, not for you... the big upswing in home costs happens in the Neoliberal Era,when rates began to drop below 8%.
The most dramatic rise in home prices is exactly when the Fed cut rates way back in the 2000s.
There's a modest increase in the late 70s-80s but that's driven by Boomfuck demographics when every last boomer is firmly in early adulthood, ready to form housholds. And that Seattle was experiencing the first Tech Driven Boom in the late 70s.
Homebuyers buy the total monthly payment, not the total home price.
Here's a chart with National Canadian Home Prices vs. Rates.
I remember in 92 I had an older girl friend her best friend lived in Coral Springs. She paid a whopping $!20K for her house in 85 but could only sell it for $98K in 92 because interest rates were like 10%
My thesis was that inflation helps debtors pay off their homes, since the mortgage is typically fixed but the incomes rise, even if the household on gets COLA and no additional income from promotions or raises.
The higher the interest rate, which should be tracking inflation, the cheaper the home price. Then refi during a dip in rates/inflation.
Your OWN CHART disproves the idea that low interest rates and low inflation keeps homes affordable because the greatest increase in prices in decades happened under that exact scenario.
The idea that high rates kept home prices in check is borne out by the fact that home prices rose very modestly, even in one tiny segment of the national market experiencing a tech boom, during massive home-formation demographic pressure from the largest generation in history all being at prime home-formation age in those years.
Even that is probably not what would happen, because today’s fed would not act like the 70s. They would rather strangle the economy, than let inflation run
TwoScoopsPlissken saysThe higher the interest rate, which should be tracking inflation, the cheaper the home price. Then refi during a dip in rates/inflation.
That's the statement that I pointed out has historically been incorrect.
Listen--you can cherry pick time periods to your hearts content, but if you look at al the data, there is a slightly positive correlation between interest rates and housing prices. Higher interest rates = higher prices.
Listen--you can cherry pick time periods to your hearts content, but if you look at al the data, there is a slightly positive correlation between interest rates and housing prices. Higher interest rates = higher prices.
However you estimate it, home prices are not just linked to interest rates.
anon_8f378 says
There's also the impact of the lack of affordable housing programs (inc. breaks for developers) as well as (dunnn dunnn dunnn) rent control.
A one-two punch of rent control and tax breaks for affordable housing would TKO the Landlords, who must be God Damned in order to God Bless America.
aha, I'm using YOUR OWN chart, and then Canadian and USA Charts. I'm literally doing the opposite of cherry picking data, since I used two nation charts and you cherry picked Western Washington.
As your own chart shows, high inflation, high interest rate eras exhibit weaker price increases (again, combined with massive demographic demand) than low inflation, low interest rate eras
Also, Anon, get a username or go to my ignore list, please. I'm reasonably sure you were a poster that had a name at one point.
Weimar republic, 1990's russia and venezuela today show that inflation results in hopelessness and despair. There are other issues at play besides paying off debts in devalued dollars...everyone wants something for nothing.
Correct. If anyone has any questions, ask yourselves why didn't prices tank in seattle 1975-1980 when inflation was rocketing up?
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The Consumer Price Index, a key indicator of inflation trends, jumped 0.5 percent in January, well above market expectations.
Markets reacted sharply to the news, with stocks sliding and government bond yields rising.
The Fed is watching inflation closely, so the report could add fuel to interest rate hikes.
https://www.cnbc.com/2018/02/14/us-consumer-price-index-jan-2018.html
Fantastic News! The best help to debtors is some decent inflation. No more wimpy inflation to pad the wallets of the banks and lenders.