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Housing prices went up 20 % between 2016 and now because zoning became more difficult? That doesn't compute. Clearing price is set by the maximum payment mortg
by HarryHirsch 5y ago
Housing prices went up 20 % between 2016 and now because zoning became more difficult? That doesn't compute.
Clearing price is set by the maximum payment mortgage a household can afford, i.e. principal + interest. If the interest rate is lower, that results in a higher cash price, and that's what we see.
Of course politicians at all levels and households who have already are uninterested in seeing a change to the status quo, so no surprise that there are supply constraints as well. All that started when housing became a popular investment vehicle sometimes in the late 1970's.
The fact that entry-level housing is extra scarce because it's less profitable for the builder than a doctor's palace doesn't help either.
- JamesBarney 5y agoI understand how interest rates increase the price of house. It's a fairly straightforward calculation. But what is your theory for the mechanism by which lower interest rates causes an increase in the price of rent?
- HarryHirsch 5y agoThat's households that are priced out of a mortgage, so they have no alternative but to rent. In emergencies you can go to a food bank, but you absolutely need a roof over the head.
- mikem170 5y agoI agree that interest rates are a factor. But so is the supply/demand curve. Housing supply is regulated by zoning and cannot freely increase with the changing market, and housing demand increased due to many Millennials reaching family and home buying age. Those are both also factors, not only interest rates.