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It's not interest rates. $100k house, 14% interest, 30yr fixed: monthly payment of $1,427 $235.3k house, 3% interest, 30yr fixed: monthly payment of $1,427 N
by cheriot 5y ago
It's not interest rates.
$100k house, 14% interest, 30yr fixed: monthly payment of $1,427
$235.3k house, 3% interest, 30yr fixed: monthly payment of $1,427
Now that house now costs $706k in NYC and $932k in SF... the problem is supply.
Nationwide, it takes a higher income to buy a home than it use to (median sales price / median income): https://fred.stlouisfed.org/graph/?g=FYMk https://fred.stlouisfed.org/graph/?g=FYMk The problem is even worse in prosperous cities.
- cko 5y agoBut 40 years at 3% inflation has a multiplier of 3.26 on top of that $235k, which brings it over $706k. Most people don't pay the median sales price outright. They pay it in 360 installments.
- imtringued 5y agoTrue and that is why interest rates on loans are usually above inflation. Inflation in almost everything except housing has been going down but interest rates are set according to the overall inflation rate meaning nowadays low interest mortgages massively benefit from inflation. Low interest rates have doubled housing prices but they didn't double financing costs. Speculators merely predict the fundamentals: A market with little supply and huge demand.
- j7ake 5y agoHave people done calculations where they compare housing prices but normalised by interest rates? I always find it difficult to compare housing prices when interest rates have dropped so much over the past decades.