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> Except now you're paying 1-2 points more on a mortgage, student, and/or car loan. When interest rates go down, house prices tend to climb proportionately as

> Except now you're paying 1-2 points more on a mortgage, student, and/or car loan. When interest rates go down, house prices tend to climb proportionately as more people take advantage of the lower mortgage rates. The same goes for cars to a lesser degree. So unless you buy a house at the very beginning of an interest rate transition (before the market has settled), the rate won't have as drastic an effect on your monthly payment as you're making it seem. You can also refinance later if you buy when rates are high, but you can't lower your principal. Also, interest rates affect other types of investments that people carry, such as retirement accounts. I don't know what the cumulative effect of all of this is, though, so I won't claim that your overall point is incorrect.

notahacker 5y ago
The house price rise adversely affects only the people buying their first home over the period interest rates are unusually low, which is obviously a small proportion of homeowners. If you've already paid your principal, it's unchanged, but the value of your asset has increased and monthly payments have gone down for those on variable rate mortgages. Even if you're a first time buyer affected by the price rise, you're better off with a high monthly payment to own a higher value house than a high monthly payment to transfer more interest to people who are wealthier than you.
imtringued 5y ago
>When interest rates go down, house prices tend to climb proportionately as more people take advantage of the lower mortgage rates. The real estate market is inefficient by design (look at Californian zoning). If you made it just as efficient as other consumer goods the problem would be gone. The problem isn't interest rates. It's the inability of the market to respond to them. In theory lower interest would just mean bigger and more dense construction as taller buildings become easier to finance. In practice people figured out that if they do "sound zoning" the increased amount of money will flow in a handful of pockets. The same is true with "sound money" where the value the economy produces grows as the population grows and becomes more productive while the amount of money stays the same and therefore benefits hoarders. The boring answer is a land value tax.

notahacker 5y ago

The house price rise adversely affects only the people buying their first home over the period interest rates are unusually low, which is obviously a small proportion of homeowners. If you've already paid your principal, it's unchanged, but the value of your asset has increased and monthly payments have gone down for those on variable rate mortgages. Even if you're a first time buyer affected by the price rise, you're better off with a high monthly payment to own a higher value house than a high monthly payment to transfer more interest to people who are wealthier than you.

imtringued 5y ago

>When interest rates go down, house prices tend to climb proportionately as more people take advantage of the lower mortgage rates. The real estate market is inefficient by design (look at Californian zoning). If you made it just as efficient as other consumer goods the problem would be gone. The problem isn't interest rates. It's the inability of the market to respond to them. In theory lower interest would just mean bigger and more dense construction as taller buildings become easier to finance. In practice people figured out that if they do "sound zoning" the increased amount of money will flow in a handful of pockets. The same is true with "sound money" where the value the economy produces grows as the population grows and becomes more productive while the amount of money stays the same and therefore benefits hoarders. The boring answer is a land value tax.