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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?
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.
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.
This site is full of poor Republicans who know nothing about investing.
Having $5K in the stock market doesn’t make you an expert.
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".
Anon (joey) must not remember that the majority of people who buy houses with a mortgage actually buy the PAYMENT not the house.
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.
Didn't work out that way for me.
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.
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.
if you buy right before a period of high inflation, you will come out ahead
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.
Why did prices level off from 1980 - 1986?
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.
And prices shot up due to lower rates and higher dual family incomes.
And you think that was from "low and falling rates"?
Unfortunately, the last 20+ years proves that statement to be false.
Patrick saysIf 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.
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.
What? The value of equity in US housing has most definitely fallen in the past, and dramatically so:
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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.