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Yay, Inflation!

By MisterLearnToCode following x   2018 Feb 14, 7:50am 4,806 views   81 comments   watch   sfw   quote     share    


Consumer prices jump much more than forecast, sparking inflation fears
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.

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2   MisterLearnToCode   ignore (4)   2018 Feb 14, 8:03am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Great News! If you make $3000 a year, and have a $1000 fixed-rate mortgage, then if you only get COLA increases (not including any raises, promotions, etc.) with inflation at 5%, then in 10 years your mortgage payment goes from 30% of your budget to about 20%.

Since you'll go from making $3000 to just under $5000, but your mortgage payment remains $1000.

So beautiful. You could through in a few hundred bucks extra for that mortgage each month and pay it off earlier.

Given the huge debts Americans have in homes, this is wonderful. Boomfucks had several decades of low inflation, they had their chance, now it's time for X and Millenials to enjoy the lower home costs and easier mortgage repayments of moderate inflation! The higher the interest rate, which should be tracking inflation, the cheaper the home price. Then refi during a dip in rates/inflation.
3   anonymous   ignore (null)   2018 Feb 14, 8:08am   ↑ like (0)   ↓ dislike (0)   quote   flag        

I agree--US needs a big dose of inflation. If Trump's tax cut had been structured differently, we may have gotten it-but sadly this one month rise will likely not continue..
4   anonymous   ignore (null)   2018 Feb 14, 8:32am   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
The 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.
5   anonymous   ignore (null)   2018 Feb 14, 8:33am   ↑ like (0)   ↓ dislike (0)   quote   flag        

High inflation is fantastic for crypto holders and the future of the housing market! The news could not be better! More fiat (inflationary currency) will flow into crypto (which is deflationary). This will be the year of crypto!
For the housing market, higher mortgage rates finally mean the last nail in the coffin for the RE bubble. House prices will collapse!
6   MisterLearnToCode   ignore (4)   2018 Feb 14, 8:38am   ↑ like (2)   ↓ dislike (0)   quote   flag        

anon_8f378 says
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.


Have home prices fell in the last two decades of historically minimal inflation?

Low inflation generally means lower interest rates which means the seller can ask for a higher price. With high inflation, almost always correlated with higher rates, the seller's asking price is limited by the monthly payment a buyer will qualify for, which is retarded by a high interest rate.
7   Heraclitusstudent   ignore (2)   2018 Feb 14, 8:52am   ↑ like (1)   ↓ dislike (1)   quote   flag        

I don't think there would be much inflation.
- still huge number of people out of labor pool.
- new automation wave in process now.
- still billions of people in poverty though out the world willing to pay for pennies/hours.
- inequalities high and climbing.
- debts increasing (feds notably)
All this means that the "main street wage deflation vs wall street inflation" meme is still in play in spite of all rumors of the contrary.
8   Heraclitusstudent   ignore (2)   2018 Feb 14, 8:53am   ↑ like (0)   ↓ dislike (1)   quote   flag        

Unless Trump starts a trade war and kicks out millions of illegal workers.
9   Quigley   ignore (0)   2018 Feb 14, 9:00am   ↑ like (2)   ↓ dislike (0)   quote   flag        

Payrolls are increasing while immigration rates are decreasing. The economy is picking up steam with the jobs added rate due to increase. The workforce demand is getting tighter, which means wages will be going up.
And as anyone who remembers the late 70s and 80s knows, big wage increases result in big inflation. No detours. Just inflation.
10   anonymous   ignore (null)   2018 Feb 14, 10:05am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Inflation if moderate, is a good thing. It's a sign of a truly healthy improving everybody's standard of living rather than a tiny fraction.

Neoliberal inequitable financial bs Era was marked by low inflation, rising inequality, and downward mobility for the 80%
11   anonymous   ignore (null)   2018 Feb 14, 10:05am   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
Have home prices fell in the last two decades of historically minimal inflation?


Absolutely. Did you forget the crash in 2008?

TwoScoopsPlissken says
Low inflation generally means lower interest rates which means the seller can ask for a higher price. With high inflation, almost always correlated with higher rates, the seller's asking price is limited by the monthly payment a buyer will qualify for, which is retarded by a high interest rate.


Obviously. But that effect is strongly outweighed by the effect higher inflation has on a buyer's pocketbook.
12   anonymous   ignore (null)   2018 Feb 14, 10:05am   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_d8885 says
For the housing market, higher mortgage rates finally mean the last nail in the coffin for the RE bubble. House prices will collapse!


Keep dreaming. Nominal house prices rose during the high inflation of the late 70s/early 80s.
13   anonymous   ignore (null)   2018 Feb 14, 10:20am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Make sure you get your annual cost of living adjustment before mindlessly cheering simply because it happens under Trump.
14   Heraclitusstudent   ignore (2)   2018 Feb 14, 10:35am   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_8f378 says
Keep dreaming. Nominal house prices rose during the high inflation of the late 70s/early 80s.

Up to 1997 real home prices were relatively stable. Then madness began...
15   Tenpoundbass   ignore (13)   2018 Feb 14, 10:40am   ↑ like (2)   ↓ dislike (0)   quote   flag        

The return of 5 for $1.00.

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.

The last 8 years, we were still trying to clear out 2009 inventory of over priced junk, so they can make way for the next year over priced junk.
There was no write off to off set losses and protect the market models. Instead they got free money up front through QE checks. Which they took and diversed into other rich man schemes that had nothing to do with the business models the QE was supposed to ease and help.
16   anonymous   ignore (null)   2018 Feb 14, 10:55am   ↑ like (0)   ↓ dislike (0)   quote   flag        

“Keep dreaming. Nominal house prices rose during the high inflation of the late 70s/early 80s.”

Has nothing to do with dreams. 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.
In the 70’s house prices were dirt cheap. House prices were never pushed that high due to artificially low interest rates in the worlds history. The next crash will be epic!
17   FNWGMOBDVZXDNW   ignore (2)   2018 Feb 14, 11:04am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Heraclitusstudent says

Up to 1997 real home prices were relatively stable. Then madness began

It's true that what happened pre-1997 makes more sense in terms of real prices.
OTOH, this proves the anon comment correct. Home prices went up with in the 70s along with inflation. Real prices stayed relatively level (within 10%), but between 1973 and 1980, inflation was about 9% on average. That means that prices of everything including houses nearly doubled in that 7 year span. So, expecting 9% inflation and high interest rates to result in flat or decreasing nominal house prices is not what happened historically. There are also plenty of logical reasons that this doesn't happen. If anyone is waiting to buy a house, they have to hope for deflation and depression. 2008 was great for those people if they acted in 2009-2011. On the flip side of that bet sits anyone who leveraged up and has a lot of debt. They hope for inflation, and 2008-2009 killed those people unless they walked. Trump and Kushner are leveraged up and hope for inflation. That is an obvious fact, and anyone who thinks/thought that Trump would not steer us toward inflation is an idiot. He loves debt, and he tells everybody about it.
18   anonymous   ignore (null)   2018 Feb 14, 11:25am   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_d8885 says
Prices are already waaaaay to high and we have historic low sales and historic low ownership rates.


Low ownership rates is actually a bullish signal for housing.

anon_d8885 says
More expensive mortgages will just end the housing bubble. Not sure why you compare that to the 70’s.


Obviously because we had extremely high interest rates
19   anonymous   ignore (null)   2018 Feb 14, 11:25am   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_8f378 says
TwoScoopsPlissken says
The 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.


Correct. If anyone has any questions, ask yourselves why didn't prices tank in seattle 1975-1980 when inflation was rocketing up?

20   anonymous   ignore (null)   2018 Feb 14, 11:43am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Inflation & wages go hand in hand.
If not it's not MAGA.
......
Only psychics take on debt,because they know they can always repay it in the future.
Their motto:"What could go wrong?"

~$1,500,000,000,000 in circulation.
Household debt ! $13,000,000,000,000
Damn math!
21   anonymous   ignore (null)   2018 Feb 14, 11:43am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Here's what I always feared the most with Trump (second most including nuclear war):

He succeeds in causing an ugly form of inflation. One where incomes don't nearly keep up. Sure, if you own your home you have somewhat of a hedge, but this will be terrible for the country. It's not that Trump intentionally causes this ugly type of inflation, it's just that if we have inflation now, it's bound to be ugly, due to the amount of debt out there, and the trend we've already sen of real interest rates (interest rates minus inflation being close tozer to negative.

What people don't get is that there must be a price for using inflation to pay your debts.

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.

The public is so gullible.
22   anonymous   ignore (null)   2018 Feb 14, 11:52am   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_cf3e5,
HEYYOU didn't log in.....again.
23   MisterLearnToCode   ignore (4)   2018 Feb 14, 11:56am   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_b62db says
, it's just that if we have inflation now, it's bound to be ugly, due to the amount of debt out there,

Uh, inflation is the best killer of debt.

Low inflation or worse, deflation, is the best incubator of debt

anon_b62db says
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.


Why would lenders take a 3% loss?
24   MisterLearnToCode   ignore (4)   2018 Feb 14, 12:00pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_24e57 says
Correct. 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.
25   MisterLearnToCode   ignore (4)   2018 Feb 14, 12:06pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

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
26   MisterLearnToCode   ignore (4)   2018 Feb 14, 12:20pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Tenpoundbass says
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.


I know a ton of Boomers who did well in the liquidation business in the 80s.
27   anonymous   ignore (null)   2018 Feb 14, 1:00pm   ↑ like (0)   ↓ dislike (1)   quote   flag        

TwoScoopsPlissken says
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%.


OK, please point out when house prices dropped during high interest rate times. That was your thesis.

TwoScoopsPlissken says
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


Except you're only looking at half the equation. Under which scenario does the household income go up more?
28   MisterLearnToCode   ignore (4)   2018 Feb 14, 1:04pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_8f378 says
OK, please point out when house prices dropped during high interest rate times. That was your thesis.


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 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. Boomers were either buying their first homes or trading up to a larger place with an expanding family.

Contrast with the fact that during the late 90s - late 2000s period, the smallest generation in recent history, Gen X, was in peak household formation years, while the bulk of millenials were too young. Yet low inflation/low rates and weak demand resulted in a massive increase in home prices regardless even with that low demographic demand

The real surprise was how modestly home prices rose around 1980 relative to the inflation rate.

So yes, I think your chart actually makes my case.
29   MisterLearnToCode   ignore (4)   2018 Feb 14, 1:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

The period around 1980 had the 3rd highest period for inflation increases in the past century.

The period between 1990-2010 was marked by low inflation.

Which one exhibited the most dramatic housing cost explosion in the absence of a prime household forming generation?

The late 90s to late 2000s, during the smallest cohort of new household formers entering the market.

30   Tenpoundbass   ignore (13)   2018 Feb 14, 1:24pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_8f378 says
OK, please point out when house prices dropped during high interest rate times. That was your thesis.


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%

Had she held on it, for another 12 years She could have gotten $700K for the main house, plus her double lot she could have built another $700K house.
31   MisterLearnToCode   ignore (4)   2018 Feb 14, 1:25pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Here's a chart with National Canadian Home Prices vs. Rates.


32   MisterLearnToCode   ignore (4)   2018 Feb 14, 1:38pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

US National Inflation vs. Home Prices (FORBES)
33   FNWGMOBDVZXDNW   ignore (2)   2018 Feb 14, 1:49pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Home prices will not go down with big inflation and interest rates. Reasons:
1. Homeowner with locked in 3 to 4% rate will just keep the house and live in it or rent it out. It would be stupid for them to sell in a high interest rate environment.
2. As long as wages are increasing, buyers will be looking at higher payments. But if inflation is high and their pay is increasing, they will have an incentive to pay a wopping mortgage at first, because they can lock that in, and they will believe that it will get easier with time. Mortgage standards will relax, because inflation will help people pay off their mortgages. The flip side of this is when inflation is pretty low, there isn't any huge penalty for renting over long time periods.

Plots of inflation versus home prices should be redone as inflation versus home price appreciation. Any plot of something that increases exponentially (prices of goods, home prices, stock prices) will look like it has exploded recently when plotted on a linear scale. It is more informative to see how appreciation looked in the 70s versus in recent times.
34   Quigley   ignore (0)   2018 Feb 14, 2:16pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Holding onto assets during a period of high inflation is how the boomer generation produced a bunch of property barons. Those economic conditions haven’t repeated yet. Wages grew tremendously and drove inflation. However America was more unionized then with less wage pressure from overseas production and workers, so wages could rise in lockstep with inflation, which drove wages higher in a cycle. Only ridiculous interest rates eventually halted it, but by then the wealthy were cash poor and the middle class were quite well off! It led to boom times for a couple decades.

I think we could use another 25-30 year cycle like that.
35   anonymous   ignore (null)   2018 Feb 14, 2:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

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.
36   anonymous   ignore (null)   2018 Feb 14, 2:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
anon_24e57 says
Correct. 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.


Correct me if I am wrong, but you seem to believe that a rise in rates will cause a FALL in nominal dollars. My chart shows that does not happen - nominal dollars did not fall at all. And yes, while this is just seattle, nominal prices nationwide did the same thing (slight nominal rise).

You can cite the rationale for why it happened in the late 70s & 80s but the point is, if you believe that a rise in rates will cause a fall in nominal dollars, not only is there NO evidence to support your assertion, but the only evidence out there shows that the prices will very slowly rise.
37   anonymous   ignore (null)   2018 Feb 14, 2:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
Here's a chart with National Canadian Home Prices vs. Rates.


Yep, but to make an effective argument you need to show that prices fall during a period of high rates. That's what you've yet to show.
38   anonymous   ignore (null)   2018 Feb 14, 2:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Tenpoundbass says
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%


That's funny because interest rates had gone down for the entire time period. Lower rates made her house worth less.
39   anonymous   ignore (null)   2018 Feb 14, 2:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says


That isn't a prices vs. inflation chart at all.

And don't use inflation adjusted prices.
40   anonymous   ignore (null)   2018 Feb 14, 2:19pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
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.


Um, here's what you said:

TwoScoopsPlissken says
The 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. It was a very popular thesis on here in the past that people just needed to wait until rates rise and then house prices will fall and it's just not true.

TwoScoopsPlissken says
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.


That's not my idea at all. My idea, as I wrote in several previous posts, is that interest rates are a 2nd or 3rd order effect. Incomes drive home prices.

TwoScoopsPlissken says
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.


They didn't keep prices in check. Prices actually rose extremely fast in the 70s compared to the previous 3 decades.
41   Heraclitusstudent   ignore (2)   2018 Feb 14, 2:23pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

However you estimate it, home prices are not just linked to interest rates.
There has been a systematic under building as the population grew by tens of millions.
The problem is not just assets inflation: housing is now a luxury item. As in scarce. In CA, a large fraction of the population is now free to go homeless, or surf couches, or live at 4 in their friends garage. Only the wealthiest bid up on housing, and the price reflect that.
42   Heraclitusstudent   ignore (2)   2018 Feb 14, 2:34pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Can inflation just start popping up in an environment that has been deflationary?
No, because raising rates would cause a host of problems and immediately plunge back the system into deflation. It has to be done slowly, eroding debts, in a growing economy. Most likely it takes 10 years to switch to a 70s style inflationary/stagflationary environment.
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.
43   anonymous   ignore (null)   2018 Feb 14, 3:51pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Heraclitusstudent says
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


Agreed. We need to adjust our target inflation rate to 5%. Enough with the 2-3% target nonsense.
44   anonymous   ignore (null)   2018 Feb 14, 4:05pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_8f378 says
TwoScoopsPlissken says
The 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.


Link?

I'll be waiting a long time for it, though.
45   anonymous   ignore (null)   2018 Feb 14, 4:05pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_8f378 says
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.


Link???

Ha Ha, I know that won't happen.
46   MisterLearnToCode   ignore (4)   2018 Feb 14, 4:17pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_8f378 says
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.


Haha, 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.

I admit I exaggerated when I stated that high rates would substantially reduce home prices - but it may have a short term effect as anecdotes on this thread have illustrated- but low interest, low inflation era has clearly shown the most explosive home price growth in the past 50 years, far outstripping the high interest, high inflation era around 1980.

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.
47   MisterLearnToCode   ignore (4)   2018 Feb 14, 4:20pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Heraclitusstudent says
However you estimate it, home prices are not just linked to interest rates.


This is also correct. 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.
48   MisterLearnToCode   ignore (4)   2018 Feb 14, 4:22pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
anon_8f378 says


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.
49   anonymous   ignore (null)   2018 Feb 14, 4:49pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken 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.


Rent control is a bad idea. Just incentivize building. You really don't even need to worry about affordable housing--more supply will take of that naturally.
50   anonymous   ignore (null)   2018 Feb 14, 4:49pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Higher interest rates=RE crash = fantastic !
51   anonymous   ignore (null)   2018 Feb 14, 4:49pm   ↑ like (0)   ↓ dislike (1)   quote   flag        

TwoScoopsPlissken says
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.


No, you're cherry picking time periods. It doesn't matter who posted the charts--what matters is you are picking selected time periods that fit your narrative and ignoring those that do not. That's pretty much the definition of cherry picking.


TwoScoopsPlissken says
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


Nope--the chart doesn't show that at all. The 70s rise is substantially greater than any rise over the previous 3 decades.
52   anonymous   ignore (null)   2018 Feb 14, 4:49pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

The 50s and 60s were another low interest rate period--why didn't we see substantial gains over that time frame?
53   anonymous   ignore (null)   2018 Feb 14, 4:50pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
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.


Do what you need to do McGee. Not sure why an anonymous name that starts with anon is any different than an anonymous name that starts with Two, but whatever floats your boat.
54   anonymous   ignore (null)   2018 Feb 14, 4:57pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

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.
55   HappyGilmore   ignore (1)   2018 Feb 14, 5:04pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_313db says
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.


No, they show that runaway inflation is bad. Moderate inflation is good.
56   MrMagic   ignore (10)   2018 Feb 14, 7:11pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

anon_24e57 says
Correct. If anyone has any questions, ask yourselves why didn't prices tank in seattle 1975-1980 when inflation was rocketing up?



The reason why prices didn't tank in the 1980's was because there was a big influx of females that entered the workforce (who are the Boomers now) at that time, adding income to the family budget with two wage earners. With more money available for housing, it naturally made home prices rise.

Notice, as soon as interest rates lowered to around 10%, home prices climbed faster. Proving once again, people buy "Payments", not "Houses".
57   MrMagic   ignore (10)   2018 Feb 14, 7:13pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

TwoScoopsPlissken says
I admit I exaggerated when I stated that high rates would substantially reduce home prices - but it may have a short term effect as anecdotes on this thread have illustrated- but low interest, low inflation era has clearly shown the most explosive home price growth in the past 50 years, far outstripping the high interest, high inflation era around 1980.


Absolutely true. Anon (joey) must not remember that the majority of people who buy houses with a mortgage actually buy the PAYMENT not the house. What's the first thing a realtor asks you at the first meeting? "Let's see how much you qualify for" and then they go shopping for a house that fits that payment.
58   anonymous   ignore (null)   2018 Feb 14, 8:23pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Sniper says
The reason why prices didn't tank in the 1980's was because there was a big influx of females that entered the workforce (who are the Boomers now) at that time, adding income to the family budget with two wage earners. With more money available for housing, it
naturally made home prices rise.


Correct - yet whether its females entering the workplace, improvements in productivity, or any other conceivable reason, the lagging yet FUNDAMENTALLY NECESSARY precondition of an inflation cycle is increasing wages. Remember this. No matter what inflationary cycle you happen happening in the future, there will somehow be more money available to those people to pay $27 for that loaf of bread, $84 for a pound of steak, $78,999 for a bargain basement car, and $1.2MM for a starter home in Temecula. In this case, the family who is now making 200K (double what they were before) is in wretched agony being bled dry by enormous prices for everything. Yet to escape the ass raping of 8K a month they are "Throwing away on rent" those that can will gladly sign up for the loan for the home - thereby causing the price support confounding those who believe prices must crash.
59   anonymous   ignore (null)   2018 Feb 14, 9:35pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

This site is full of poor Republicans who know nothing about investing.

Having $5K in the stock market doesn’t make you an expert.
60   MrMagic   ignore (10)   2018 Feb 14, 10:15pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_fad35 says
This site is full of poor Republicans who know nothing about investing.

Having $5K in the stock market doesn’t make you an expert.


Posting as anon doesn't either.
61   anonymous   ignore (null)   2018 Feb 15, 5:57am   ↑ like (0)   ↓ dislike (0)   quote   flag        

I like how people pretend that wages are going to be going up. Lol

The better question is why is Trump selling US Debt so cheap when it’s obvious that it would sell for MUCH Moar? Not very good at making deals, it seems
62   anonymous   ignore (null)   2018 Feb 15, 6:40am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Sniper says
he reason why prices didn't tank in the 1980's was because there was a big influx of females that entered the workforce (who are the Boomers now) at that time, adding income to the family budget with two wage earners. With more money available for housing, it naturally made home prices rise.

Notice, as soon as interest rates lowered to around 10%, home prices climbed faster. Proving once again, people buy "Payments", not "Houses".


Not sure how a graph can be misread so much. Prices stalled because the economy was in a recession. Recession = lower wage growth.

Home prices rose on that chart from 1976 - 1980 : higher rates and rising rates. From 1989- 1991: high and stable rates. From 1995-2008: moderate and falling rates.

Prices fell from 2008-2012: Low and falling rates.

Not sure how anyone could look at these time periods and the resulting housing price changes and conclude that low interest rates are good for home prices and high rates are bad.
63   anonymous   ignore (null)   2018 Feb 15, 6:41am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Sniper says
Anon (joey) must not remember that the majority of people who buy houses with a mortgage actually buy the PAYMENT not the house.


Nope---anon remembers that. Anon always remembers that during times of higher inflation, wages/salaries go up much more/faster, so the higher income can easily afford to pay a bit more interest.
64   anonymous   ignore (null)   2018 Feb 15, 7:51am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Flat wages and higher interest means even less people will buy homes. RE market will collapse in an epic way!
65   anonymous   ignore (null)   2018 Feb 15, 8:17am   ↑ like (0)   ↓ dislike (0)   quote   flag        

If we have high inflation, how angry will the perma renters be?

Permarenter will mutter to himself that house payments are much higher than rent, so it's a great deal to rent. 3 years later, his rent will have gone up 30%, and his wife's friend will be talking about how her mortgage is now lower than permarenter's wife's rent, and it is fixed and getting easier every year. Permarenter's wife will be sad.
66   Patrick   ignore (1)   2018 Feb 15, 8:19am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Didn't work out that way for me. My rent went up only slowly, and the stock market beat housing appreciation. Wife is happy.

Conversely, I'm sure there were a ton of divorces in the wake of the housing bubble implosion starting in 2008.

It totally depends on the numbers involved. It is wrong to say that renting or buying is always better.
67   anonymous   ignore (null)   2018 Feb 15, 8:21am   ↑ like (0)   ↓ dislike (1)   quote   flag        

TwoScoopsPlissken says
Consumer prices jump much more than forecast, sparking inflation fears
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.


The CuntFace McRacist administration has gutted regulations aimed at keeping banks for fist fucking the nation, so it's not like consumers getting reamed by poor fiscal and monetary policy is going to harm the banks in any way. That carried interest loophole the Cunt was going to close to rein in Wall Street? What a fucking joke, like the rest of his lies.
68   anonymous   ignore (null)   2018 Feb 15, 8:28am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
Didn't work out that way for me.

Did you make this decision in a period of high inflation? That is what we are talking about after all.

It's wrong to say that renting or buying is always better.
However, generally speaking, if you buy right before a period of high inflation, you will come out ahead. That is not rocket science. As an example of things working out badly, you mentioned buying right before a period of deflation and huge recession. That is the opposite of the situation that we are discussing.
69   anonymous   ignore (null)   2018 Feb 15, 8:43am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
Didn't work out that way for me. My rent went up only slowly, and the stock market beat housing appreciation. Wife is happy.

Conversely, I'm sure there were a ton of divorces in the wake of the housing bubble implosion starting in 2008.

It totally depends on the numbers involved. It is wrong to say that renting or buying is always better.


What period did you rent through with high inflation?
70   MrMagic   ignore (10)   2018 Feb 15, 8:43am   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_8f378 says
Home prices rose on that chart from 1976 - 1980 : higher rates and rising rates.


Why did prices level off from 1980 - 1986?

anon_8f378 says
From 1989- 1991: high and stable rates.


Wrong, rates took a steep dive back down from 18% to 10%, which made houses more affordable, which cause prices to start rising again. As rates dropped below 10%, prices accelerated higher.

anon_8f378 says
From 1995-2008: moderate and falling rates.


And prices shot up due to lower rates and higher dual family incomes.

anon_8f378 says
Prices fell from 2008-2012: Low and falling rates.


And you think that was from "low and falling rates"?

Really??

anon_8f378 says
Not sure how anyone could look at these time periods and the resulting housing price changes and conclude that low interest rates are good for home prices and high rates are bad.


Unfortunately, the last 20+ years proves that statement to be false.
71   Patrick   ignore (1)   2018 Feb 15, 8:50am   ↑ like (1)   ↓ dislike (0)   quote   flag        

anon_61c8a says
if you buy right before a period of high inflation, you will come out ahead


Sure, high inflation can decrease the real value of debt if your salary goes up but the debt does not.

The banks aren't stupid though. Are they really going to lend at interest rates below the rate of inflation?

If they raise their rates to compensate for inflation, that makes houses more expensive for new buyers, and the value of the equity in existing houses could well fall.
72   anonymous   ignore (null)   2018 Feb 15, 9:04am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
If they raise their rates to compensate for inflation, that makes houses more expensive for new buyers, and the value of the equity in existing houses could well fall.


It never has in the past. Not sure why it would be different this time.
73   Patrick   ignore (1)   2018 Feb 15, 9:05am   ↑ like (0)   ↓ dislike (0)   quote   flag        

What? The value of equity in US housing has most definitely fallen in the past, and dramatically so:

74   anonymous   ignore (null)   2018 Feb 15, 9:06am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Sniper says
Why did prices level off from 1980 - 1986?


Because the US went into recession in 1980.

Sniper says
Wrong, rates took a steep dive back down from 18% to 10%, which made houses more affordable, which cause prices to start rising again. As rates dropped below 10%, prices accelerated higher.


Seriously why do we have to argue facts? Prices started rising quickly in 1989 after 2 years of steady to slightly rising rates.

Sniper says
And prices shot up due to lower rates and higher dual family incomes.


According to you. But you have a very weak case.

Sniper says
And you think that was from "low and falling rates"?


How many times do I have to say the same thing. I believe interest rates are a 2nd or 3rd order effect which have very little effect on housing prices. The fact that housing prices have risen during high interest rates and fallen during low interest rates show pretty conclusively that I am correct.

Sniper says
Unfortunately, the last 20+ years proves that statement to be false.


Nope--like I told another poster, cherry picking a short time proves nothing.
75   anonymous   ignore (null)   2018 Feb 15, 9:53am   ↑ like (0)   ↓ dislike (0)   quote   flag        

anon_8f378 says
Patrick says
If they raise their rates to compensate for inflation, that makes houses more expensive for new buyers, and the value of the equity in existing houses could well fall.


It never has in the past. Not sure why it would be different this time.


Patrick is half right. Banks did compensate making houses more expensive for new buyers. However thanks to sticky prices housing equity did not fall. Instead the volume of transactions slowed to a trickle and the only houses that cleared the market we're the ones sold to Byers willing to pay those sticky prices.

We saw on the same phenomenon 2012 or so. Negative equity was so high that everyone here just assumed that prices would collapse and a Second wave of sellers would get desperate and Sell. That did not happen and I was desperate and sellers were Starburn enough to hold on as the volume of transactions is slowly clearing the market.
76   anonymous   ignore (null)   2018 Feb 15, 9:53am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Sorry that should be "sellers desperate" and "sellers were stubborn". Damn talk to text!
77   Patrick   ignore (1)   2018 Feb 15, 9:54am   ↑ like (0)   ↓ dislike (0)   quote   flag        

If you register on the site, then you can edit your comments.
78   ThreeBays   ignore (0)   2018 Feb 15, 9:55am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
Didn't work out that way for me. My rent went up only slowly, and the stock market beat housing appreciation. Wife is happy.

Conversely, I'm sure there were a ton of divorces in the wake of the housing bubble implosion starting in 2008.

It totally depends on the numbers involved. It is wrong to say that renting or buying is always better.


House buyers are usually using 5:1 leverage so their appreciation could be much larger compared to unleveraged stock ownership. Of course, the same can apply in reverse - hence people being under water in 2018, and with sad wives.
79   anonymous   ignore (null)   2018 Feb 15, 10:14am   ↑ like (0)   ↓ dislike (0)   quote   flag        

ThreeBays says
House buyers are usually using 5:1 leverage so their appreciation could be much larger compared to unleveraged stock ownership. Of course, the same can apply in reverse - hence people being under water in 2018, and with sad wives.


Yup, the 5 to 1 leverage is a huge difference maker vs investing in stocks 1:1 and renting - this difference is astounding given a typical human lifetime and productive years.

Speaking of sad wives, I think divorces are much more likely if stock investing tanks especially if a house could have been purchased as an alternative choice. With house, there's something concrete, with stocks, you are a virtual shareholder!
80   anonymous   ignore (null)   2018 Feb 15, 10:14am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
What? The value of equity in US housing has most definitely fallen in the past, and dramatically so:


Sorry, must not have been clear. You stated that high interest rates may cause prices to tumble. That's what I was saying hasn't happened in the past.

Of course prices have fallen in the past--typically during recessions, when incomes fall.
81   HappyGilmore   ignore (1)   2018 Feb 16, 8:36am   ↑ like (0)   ↓ dislike (0)   quote   flag        

This graph shows the much stronger correlation between income growth and housing prices:

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