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Regarding the chart you included - when interest rates are high it is because of inflation - inflation devalues money, this means that houses can cost more every year, based on inflation rate alone. If money got devalued at 10%/year, houses can be expected to go up around the same amount. So yes, the relationship between rates and housing prices is not necessarily going to be inverse, as inflation that raises rates also works to increase house prices, if there's good demand and shortage, especially.
If that were true when rates got way high the prices wouldn’t have collapsed .
The same could be said for stock prices in the 1980s as dollars got devalued and we know markets were dead for 20 years
If that were true when rates got way high the prices wouldn’t have collapsed .
The same could be said for stock prices in the 1980s as dollars got devalued and we know markets were dead for 20 years
It's not guaranteed (asset prices increase with inflation), it requires demand and/or shortage to be present. Right now there's very real housing shortage. Back during past years, there were some construction booms that resulted in oversupply and temporary drops in housing prices. Also, general economic collapse causes less demand for housing as people have no money to buy, extended families move in together, etc.
The chart you shared shows housing market plot following interest rate plot precisely until the highest peak in interest rates. Inflation started to decrease then, but housing prices continued to grow for some time nevertheless, because of general real estate business cycle timing, demand, good economy, bubble mentality, lax mortgage rules, etc.
There is no see saw effect between home prices and rates until rates sky rocket .
Prices are based on local economic conditions .
It is a myth that there is some mythical see saw going on .
People just spend less on a house as rates rise then try may have and buy less house .
Prices move together more than they move opposite as higher rates mean a strong economy
No offense but this chart sucks. Going back to 130+ years (who f'n cares about 1890 prices) completely skews the spikes on variation. Pretty much, this is data chart manipulation. Also, it doesn't include the recent history so I really don't see any value in this chart.
And really, no chart prior to 1968 is really just unless you're a white male. The Fair Housing Act was passed in 1968.
No offense but this chart sucks. Going back to 130+ years (who f'n cares about 1890 prices) completely skews the spikes on variation. Pretty much, this is data chart manipulation. Also, it doesn't include the recent history so I really don't see any value in this chart.
And really, no chart prior to 1968 is really just unless you're a white male. The Fair Housing Act was passed in 1968.
From 2015 to 2018 we had 9 fed increases …real estate rose in most areas .
Mortgages have been bid up by investors the last year to 4% and homes are still going up with big demand.
So it still reflects no see saw action between rates and values
Same with the stock market
Last edited by mathjak107; 02-21-2022 at 03:39 AM..
History shows us that we are not just cherry picking a time frame ….there has historically been little link between rates and prices until rates got very high …..all lower end buyers do is buy less house as interest rates rise ….upper end buyers can pay cash in many cases .
So It shows us that 2015 to 2018 wasn’t just a fluke where rates went up and values also went up.
You have many who think the stock market responds negatively to rate increases , yet that has not been the case for 20 years .
Also every time the fed has raised short term interest rates more then 1% in a year the last 40 years , longer term bonds went up in value. Not down , with one exception , 1994.
Investors make the mistake of thinking there is some see saw correlation between asset classes and there isn’t .
All assets react not to what each other is doing but to the underlying conditions in the economy .
Traditionally higher rates mean a bustling economy . That is good for asset prices
Last edited by mathjak107; 02-21-2022 at 03:55 AM..
None of your charts include volatility which is at an all time high. Nor inflation which is at a 30+ year high. So these charts maybe accurate but they don't tell the whole story.
It really feels like more Americans than are barely getting by, at least in my lifetime. Covid really caused a wider divide in the have and have nots.
With inflation out of control rates could hit 6% in no time maybe even 8% if that happens could the bubble burst in home values? If the stock market bubble burst likely money will turn to the bond markets which is where Mortgage rates are derived from. Could we see 10% rates on 30 year fixed? I would be happy with that because I have a very small mortgage rather have higher rates then homes going up 50% a year.
The value of my home doesn't have anything to do with the ability of someone to afford a mortgage. It only shrinks the pool of potential buyers that can afford the increased payment.
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