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Well either rates are low and prices high or rates high and prices low.
Pick your poison.
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Originally Posted by VendorDude
It's almost like there's some sort of inverse relationship between asset prices and interest rates.
Quote:
Originally Posted by VendorDude
No, it was not. You have been attempting like the coyote trying to run through the tunnel he just painted on the side of a mountain to claim that a basic premise of finance is in fact untrue. You are failing at it miserably. Time to pay the check and go home.
In a thread about mortgage deductions, housing prices what is the above then? I haven't painted anything
Rising rates and housing prices can and often have coexisted
Only when there have been other factors influencing it.
I'm not sure what you don't understand about this. Maybe a different example would help. If you go out to buy a car and you intend to finance it, which is more important, the monthly payment or the actual price you pay for the vehicle?
If you buy a $40,000 car at 10% interest your monthly payment would be $850 a month. If your interest rate is 3% your monthly payment would be $719. Get it now?
Only when there have been other factors influencing it.
I'm not sure what you don't understand about this. Maybe a different example would help. If you go out to buy a car and you intend to finance it, which is more important, the monthly payment or the actual price you pay for the vehicle?
If you buy a $40,000 car at 10% interest your monthly payment would be $850 a month. If your interest rate is 3% your monthly payment would be $719. Get it now?
In the real world it's never isolated just to assets vs interest rates so should we discuss theory or made up examples or what really has happened ?
Only when there have been other factors influencing it.
I'm not sure what you don't understand about this. Maybe a different example would help. If you go out to buy a car and you intend to finance it, which is more important, the monthly payment or the actual price you pay for the vehicle?
If you buy a $40,000 car at 10% interest your monthly payment would be $850 a month. If your interest rate is 3% your monthly payment would be $719. Get it now?
That's fine when there aren't alternatives. There are other ways people address the monthly payment issue when it comes to housing, for example (1) buy a smaller house or a similar one in a lower priced community, (2) get an adjustable rate mortgage with a lower initial term rate, etc.
Only when there have been other factors influencing it.
I'm not sure what you don't understand about this. Maybe a different example would help. If you go out to buy a car and you intend to finance it, which is more important, the monthly payment or the actual price you pay for the vehicle?
If you buy a $40,000 car at 10% interest your monthly payment would be $850 a month. If your interest rate is 3% your monthly payment would be $719. Get it now?
The problem with their analysis is that the rates don't go up very much during the expansion. That is part of the effect of the asymmetric monetary policy. Rates go down sharply during recessions, continue down during expansions, and only start to rise late in the cycle, well after housing is inflating.
The main exception to the rates argument is that homes inflated during the 70's and 80's. The reality is that homebuyers adjusted and homes started to be priced for two-incomes during the 70's and 80's.
That's fine when there aren't alternatives. There are other ways people address the monthly payment issue when it comes to housing, for example (1) buy a smaller house or a similar one in a lower priced community, (2) get an adjustable rate mortgage with a lower initial term rate, etc.
What you just described explains the inverse relationship between price and interest rate when it comes to housing, are you trying to argue otherwise?
If you have limited funds and the interest rates go up you either don't buy, or you buy an asset of a lesser value.
What you just described explains the inverse relationship between price and interest rate when it comes to housing, are you trying to argue otherwise?
If you have limited funds and the interest rates go up you either don't buy, or you buy an asset of a lesser value.
a single individual's ability to buy a property does not define that property's value, the market does. Just because someone makes an offer and tells the seller that's all they can afford doesn't define what the FMV is that the seller can achieve from another buyer.
You may be the only person in the world contrarian enough to believe that. Try to understand that the question here has to do with the partial derivative of asset prices with respect to interest rates. Did you do partial derivatives in school or do you think that those must be some sort of exotic financial instrument?
I'm curious. Show us "the partial derivative of asset prices with respect to interest rates." I'd like to see what you're talking about.
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