2 ms·
The issue is the doubling of housing prices though, not the interest rates. Historical evidence suggests that 5% is more than low enough to fuel a house-buildi
by mywittyname 5y ago
The issue is the doubling of housing prices though, not the interest rates. Historical evidence suggests that 5% is more than low enough to fuel a house-building boom.
Plus, if you buy into the idea that interest rates dictate housing prices, then 5% rates should lower housing prices. I personally don't see this happening in our specific climate, but there's ample evidence that the two are negatively correlated.
- voisin 5y agoI think 5% is just the start unless inflation rapidly reverses. I suspect the nominal rate is a lot less important than the effective real rate.
- mywittyname 5y agoAgreed. Which is why I don't think 5% is that bad. It's barely above the average rate between the GFC and the pandemic (~4.25%). But inflation is much, much higher. The nominal rate should be important right now. The nominal rate in the before times was like 4% interest - 1-2% inflation. Now the nominal rate is 5% with 7-12% inflation. Normal people are absolutely going to start factoring inflation into the equation. Especially if inflation continues to drive wage growth.