patrick.net

Eric Holder says

What would happen to the housing market and the economy at large if the mortgage rates were 28%?

Houses that were bought for $500k will be for sale for $100k or even less.

AFTER those $500k houses stay frozen from the markets for as long as possible. Unless the corporate house holders dump entire neighborhood blocks that they own to get the hell out pronto. <-- this is a distinct possibility in some housing markets that never happened before. If mortgage rates are in the double digits then their carrying costs should also be, too.

What person homeowners and their lending institutions do in reaction to that will be interesting. Those that own outright will sell quick like the corpos. Those that are debtslaved will mail in the keys and squat like we saw in 2009-12 before.

RWSGFY says

Are you saying that every current owner will be completely fooked?

The ones that own the homes outright, no. Loan holders with just a few years to go, no. Loan holders that are seriously underwater can toss the keys to the bank. In reality though, if we had 28% rates that means serious inflation so the houses would have appreciated well above the original loan value.

DOGEWontAmountToShit says

Eric Holder says

What would happen to the housing market and the economy at large if the mortgage rates were 28%?

Houses that were bought for $500k will be for sale for $100k or even less.

AFTER those $500k houses stay frozen from the markets for as long as possible. Unless the corporate house holders dump entire neighborhood blocks that they own to get the hell out pronto. <-- this is a distinct possibility in some housing markets that never happened before. If mortgage rates are in the double digits then their carrying costs should also be, too.

What person homeowners and their lending institutions do in reaction to that will be interesting. Those that own outright will sell quick like the corpos. Those that are debtslaved will mail in the keys and squat like we saw in 2009-12 before.

You are not counting the replacement cost for housing into your equation. It acts as a floor for existing housing pricing as long as the demand to purchase available for sale units is there. We would have to get to the situation that Japan is in for steep interest rate increases to kill the value of homes like you’re suggesting ($0.20 on the dollar).

Real assets don't go down in value during periods of rapid inflation.

Misc says

"Real assets don't go down in value during periods of rapid inflation."

They do if you are in a 30 year old fraudulent housing bubble.

ForcedTQ says

steep interest rate increases to kill the value of homes like

WTF do you think 28% mortgage rates are?

Higher interest rates are a sign of inflation. Irrespective of cause and effect, inflation is a slow steamroller to push real assets values higher and higher. Corrupt policies and free printing press are the primary root cause for the inflation.

Blue says

inflation is a slow steamroller to push real assets values higher and higher.

Not when interest rates go up as well. Particularly when they go up to 28%, which is the context we are discussing here.

Long term, you can be correct. And in hyperinflationary environments, asset values collapse in nominal value, actually.

I’m not sure housing will ever fall in value in any meaningful way.

1. Fiat
2. Job destroying tech
3. H1B et al
4. Endless immigration. Btw, Trump is only going to kick the criminal immies out.
5. One of the best ways of making $$ is
a. Owning lots of assets and then b. Making
it more and more difficult to produce those
same assets. Short supply raises prices.

DOGEWontAmountToShit says

ForcedTQ says

steep interest rate increases to kill the value of homes like

WTF do you think 28% mortgage rates are?

You missed the entire first part of that sentence, you would have to have a situation like Japan. Where there is so much supply and not even the bodies to fill the homes.

ForcedTQ says

You missed the entire first part of that sentence, you would have to have a situation like Japan. Where there is so much supply and not even the bodies to fill the homes.

Everything is rentals now. Having lived it and watched my parents get wiped out in real estate, younger people don't want the "American Dream" for now. There's no demand and any potential supply is locked up in low interest rates or paid off.

It's not a boom and interest rates don't matter if people don't sell. If you're good at your 4% interest rate, why would you sell? 28% would just reduce inventory and those that "need" to move keep bumping the prices up. Low interest rates caused where we are now. Can't say it enough. Inventory. A crash is 12-18 months inventory and I don't see that anywhere.

ForcedTQ says

you would have to have a situation like Japan.

No.

Demand destruction is a permanent downward shift on the demand curve in the direction of lower demand of a commodity induced by a prolonged period of high prices or constrained supply.

WookieMan says

If you're good at your 4% interest rate, why would you sell?

Because you can't afford assisted living, or you died and your kids don't want to live in Del Boca Vista 55+ Community for Active Seniors, or there's no jobs in Rustbeltowaga, OH and dad really stopped maintenance about 10 years ago when he busted his hip.

"I tell you nobody has more stuffed wallabies than me. Did I tell you the guys in the Wallaby Association of America were floored by my collection? I already filled the Guest Bedroom! I'm leaving it for you, it's worth a Million Dollars I'm sure"

AmericanKulak says

WookieMan says

If you're good at your 4% interest rate, why would you sell?

Because you can't afford assisted living, or you died and your kids don't want to live in Del Boca Vista 55+ Community for Active Seniors, or there's no jobs in Rustbeltowaga, OH and dad really stopped maintenance about 10 years ago when he busted his hip.

"Seniors"/boomers already lost their home in the bust. They had to wait 4-7 years to buy again. The got low interest rates IF they bought again and there's no incentive to move. In home care if they have issues is cheaper than rent at a "facility."

The Boomer wave has already crashed. There's no new wave coming in and buying. They're all renting. No one is building. Lifestyles have changed and no one wants to sit in their house, apartment or whatever. Houses aren't important in the short term.

That said the kids will eventually buy homes. I give it 4-8 years. Unless they overbuild I don't see housing crashing for a long time. We experienced a once in a lifetime phenomenon in 2006.

You will own nothing and won’t be happy either.