Comments 1 - 40 of 80 Next » Last » Search these comments
The best help to debtors
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.
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.
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.
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.
Comments 1 - 40 of 80 Next » Last » Search these comments
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.