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Although 13% MM fund returns and 19% 2nd deeds of trust helped ease the pain.
We're already at the lowest home ownership rate since at least 1965 (which is as far back as the Census Bureau has tracked it). With the student loan debt and, in many cases, late start to getting real careers for millenials, it would plunge even further if that happened.
More evidence of how clueless many people are with regard to economics. "Interest" is essentially the cost of borrowing money. When you put money in a "savings" account, the bank in turn lends that money to others ("borrowing" it from you). Banks pay high interest to "savers" when they need to attract that cash to lend out. And, since banks actually can not run at a loss indefinitely-the interest paid on savings will always be considerably less than the rate on borrowing.
We had very high interest rates in my lifetime, during the late 70s/early 80s. Mortgage interest was in the high teens. Other loans were even worse. Those rates bankrupted many people, stalled housing construction and auto production and triggered the worst recession since the Great Depression (hype about 2008 not withstanding).
While high interest on savings sounds appealing to people that don't need to borrow, it ultimately hurts them too. High interest is inevitably tied to high inflation. While 8% interest sounds nice...when inflation is running 10% you are losing money on every dollar in a savings account.
More evidence of how clueless many people are with regard to economics. "Interest" is essentially the cost of borrowing money. When you put money in a "savings" account, the bank in turn lends that money to others ("borrowing" it from you). Banks pay high interest to "savers" when they need to attract that cash to lend out. And, since banks actually can not run at a loss indefinitely-the interest paid on savings will always be considerably less than the rate on borrowing.
We had very high interest rates in my lifetime, during the late 70s/early 80s. Mortgage interest was in the high teens. Other loans were even worse. Those rates bankrupted many people, stalled housing construction and auto production and triggered the worst recession since the Great Depression (hype about 2008 not withstanding).
I was around then also and no it was not as bad as 2008.
Quote:
While high interest on savings sounds appealing to people that don't need to borrow, it ultimately hurts them too. High interest is inevitably tied to high inflation. While 8% interest sounds nice...when inflation is running 10% you are losing money on every dollar in a savings account.
I'm not sure who suggested there should be high interest rates. The argument is that they should be higher.
No it would not......here is why.....if the Fed announced that they were going to start raising rates, everyone that has been sitting on the sidelines would jump to buy. Things would boom.
"Home buyers waiting on the sidelines" are, in my estimation, a myth.
At best, they are a hypothesis that cannot be verified.
What can be verified is that when rates go up, the prices that qualified buyers will be able to afford will fall, affecting housing demand in very concrete and unavoidable ways.
62% of Americans have less than $1000 in their savings accounts. 21% of Americans don't have savings accounts (they are counted in the 62%). Now I'm not sure if 8% interest rates would lend these people to save more or if their lives are so paycheck-to-paycheck that they would be crushed by the rising interest rates.
Regardless of interests rates, one needs to have a savings for emergency.
"Home buyers waiting on the sidelines" are, in my estimation, a myth.
At best, they are a hypothesis that cannot be verified.
What can be verified is that when rates go up, the prices that qualified buyers will be able to afford will fall, affecting housing demand in very concrete and unavoidable ways.
It's all relevant. When I bought my first house the rate was 9.9%. The person that sold it, bought a bigger house. It all worked out.
We're already at the lowest home ownership rate since at least 1965 (which is as far back as the Census Bureau has tracked it). With the student loan debt and, in many cases, late start to getting real careers for millenials, it would plunge even further if that happened.
More evidence of how clueless many people are with regard to economics. "Interest" is essentially the cost of borrowing money. When you put money in a "savings" account, the bank in turn lends that money to others ("borrowing" it from you). Banks pay high interest to "savers" when they need to attract that cash to lend out. And, since banks actually can not run at a loss indefinitely-the interest paid on savings will always be considerably less than the rate on borrowing.
We had very high interest rates in my lifetime, during the late 70s/early 80s. Mortgage interest was in the high teens. Other loans were even worse. Those rates bankrupted many people, stalled housing construction and auto production and triggered the worst recession since the Great Depression (hype about 2008 not withstanding).
While high interest on savings sounds appealing to people that don't need to borrow, it ultimately hurts them too. High interest is inevitably tied to high inflation. While 8% interest sounds nice...when inflation is running 10% you are losing money on every dollar in a savings account.
High interest rates help control inflation. Volker.
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