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I don’t think low interest rates tell even half the story of affordability. 200k at 10% is equivalent to 400k at 3.5%. But we haven’t seen 10% rates since 1989
by taurath 5y ago
I don’t think low interest rates tell even half the story of affordability. 200k at 10% is equivalent to 400k at 3.5%. But we haven’t seen 10% rates since 1989.
- gruez 5y agoIt accounts for more than half. Using the st louis fed chart that you linked, housing is up 137% from jan 2000 to jan 2021. If we adjust for interest rates[1] (8% -> 2.3%), that gets us down to 23%. If we adjust for inflation[2], it gets down to 21% lower. [1] https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US [2] https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL
- taurath 5y agoBut the point was that the CPI doesn’t accurately track real housing costs. Do you believe housing costs have gone down relative to inflation? Housing costs relative to median income have doubled but that isn’t reflected in CPI data.
- gruez 5y ago>But the point was that the CPI doesn’t accurately track real housing costs. Do you believe housing costs have gone down relative to inflation? Well we just saw that adjusting for interest rates wipes away most of the increases in housing prices, and we didn't need CPI to reach that conclusion, only housing price index and interest rates. > Housing costs relative to median income have doubled but that isn’t reflected in CPI data. And what's your source for that claim? I'm sure that in the hottest housing markets that's true, but the CPI is a national measurement, not a local one.