Home prices are going to start falling, and it's going to be a major shitshow for the country

[Johnny2X2X]

24. values won't fall

Last edited Thu Jun 16, 2022, 02:06 PM - Edit history (1)

Rising interest rates will affect prices, but prices are rising so fast, all this will do is slow the rise or potentially stop the rise.

The value of a home isn't its sale price, but the monthly payment someone can afford to live in it. Interest rates make that payment higher, so the principle will be lower. There will be no housing bubble, because it's still a supply and demand issue where there's still not enough supply and the cost of building new homes is still very elevated mostly due to supply issues.

But context matters for these rate hikes. The overnight lending rate is still only 1.5-1.75%, ideally economists want this to be between 2 and 5 %. We're going to raise it to right in the middle of that (3.4%). This is us getting back to normal for interest rates. The sacrifice is anticipated to be 0.5% rise in unemployment rate, which will keep us near full employment. We've had insanely low interest rates for so long now, we forget what is normal. It's not normal to finance a house at 3.0%. 6.0% is normal. To those who got financing around 3%, kudos, you've got an amazing investment that will build your wealth like few other investments can. Happy I got 3.25% when I could.

Rents are also a supply and demand issue right now, there's simply not enough housing in our country right now. Market forces still drive the price of rent, there aren't monopolies price fixing. But there are ruthless landlords and corporations who make decisions without a care for the human toll of it.