Market prices are set at the margin by people who are buying and selling today, so yes, the monthly payments of new buyers absolutely matter.
2018 purchase prices were much lower than now, so your argument about rates isn’t convincing me. It’s the combination of obscene prices and moderate rates that is the issue. Obscene prices only made a bit of sense when rates were pushing under 3%.
I’m a homeowner, so it’s not in my interest to see prices fall, but I also don’t see why anybody would buy my house today given how high the payment would be. I would not be able to rent it out for anywhere near that number. So the situation appears very unstable to me.
I don’t expect 8% inflation to persist for 30 years. Do you? You’re right that if we average 8% inflation over the next 30 years, folks should buy the biggest house they can get approved for as long as rates are below 8%. But that’s taking a pretty big risk. Inflation has never run that hot for that long in the U.S. before. The Fed targets 2% inflation and has spent most of the last 14 years falling short of their target.
But we are in a new financial regime now, and nobody really knows what’s going to happen for sure.
I don’t expect inflation to remain high - but nor do I expect interest rates to remain high. The spread between the real dollar and nominal dollar rates right now is super negative and I suspect even if individuals don’t buy, institutional will. To your point, who knows what will happen?
2018 purchase prices were much lower than now, so your argument about rates isn’t convincing me. It’s the combination of obscene prices and moderate rates that is the issue. Obscene prices only made a bit of sense when rates were pushing under 3%.
I’m a homeowner, so it’s not in my interest to see prices fall, but I also don’t see why anybody would buy my house today given how high the payment would be. I would not be able to rent it out for anywhere near that number. So the situation appears very unstable to me.
I don’t expect 8% inflation to persist for 30 years. Do you? You’re right that if we average 8% inflation over the next 30 years, folks should buy the biggest house they can get approved for as long as rates are below 8%. But that’s taking a pretty big risk. Inflation has never run that hot for that long in the U.S. before. The Fed targets 2% inflation and has spent most of the last 14 years falling short of their target.
But we are in a new financial regime now, and nobody really knows what’s going to happen for sure.
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