4 ms·

Hmm. So if a house cost $2m at 3% interest last year, then interest spikes to 18%, the house should drop to $550,000? Yeah I really don't see prices dropping 70

Hmm. So if a house cost $2m at 3% interest last year, then interest spikes to 18%, the house should drop to $550,000? Yeah I really don't see prices dropping 70%, sorry. As much as I wish they would, as someone who wants to buy their first house.

danielmarkbruce 4y ago
I'd take the bet that it would get close(sub $1 mill) all else equal. In some areas houses dropped over 50% during the financial crises.
- deleted 4y ago
  [deleted]
- modeless 4y ago
  Around here they barely dropped at all and for barely more than a year.
  - danielmarkbruce 4y ago
    Out of interest, where?
BirdieNZ 4y ago
If interest rates go to 18%, you bet the house would drop to $550,000. I'm expecting house prices in my country to drop at least 30% in the next couple of years and I'm only expecting interest rates to get to around 10%, 18% would destroy the housing market.
- modeless 4y ago
  Well I hope I'm wrong and you're right, because I expect interest rates to keep rising and I could really use a 70% drop in house prices.
- deleted 4y ago
  [deleted]
- deleted 4y ago
  [deleted]
- deleted 4y ago
  [deleted]
- quickthrower2 4y ago
  If interest rates are 18% the crash will be so hard that some residences can’t be given away (in undesirable locations) because the tax and maintenance will be higher the home value, and the economy will be fucked. You will probably be out of work. If you can get a job as a liquidator and have lots of cash as it’ll be hard to borrow at all. The last black swan like that was probably before my time (1980s) but maybe the ERM debacle in the UK was close.
- skellington 4y ago
  18% implies a very high inflation rate, 15% or more. At that rate employers will be forced to give significant raises or else purchasing power would drop 50%+ in only three years. Employers tend NOT to match inflation, but they will have to give more than the usual 2-3%. Perhaps 10%, perhaps 13%, depends on the employer, but those higher salaries will send real estate to the moon even after the initial 50% dip. Of course these are extreme numbers and reality is not likely to get this extreme since "inflation" at the moment is primarily (lack of) supply side driven.
  - cudgy 4y ago
    > Employers tend NOT to match inflation Eventually they’ll have to or people will be spending 100+% of their income on basic food and shelter with no way to afford getting to work.
bidirectional 4y ago
Yes, your opinion seems based on how the numbers sound rather than what they imply/mean. The United States reaching 18% interest rates would have absolutely massive effects, we've been in a low interest rate environment since the GFC and 10% has not been broken for ~40 years. House prices plummeting would be the least of it.

danielmarkbruce 4y ago

I'd take the bet that it would get close(sub $1 mill) all else equal. In some areas houses dropped over 50% during the financial crises.

deleted 4y ago
[deleted]
modeless 4y ago
Around here they barely dropped at all and for barely more than a year.
- danielmarkbruce 4y ago
  Out of interest, where?

BirdieNZ 4y ago

If interest rates go to 18%, you bet the house would drop to $550,000. I'm expecting house prices in my country to drop at least 30% in the next couple of years and I'm only expecting interest rates to get to around 10%, 18% would destroy the housing market.

modeless 4y ago
Well I hope I'm wrong and you're right, because I expect interest rates to keep rising and I could really use a 70% drop in house prices.
deleted 4y ago
[deleted]
deleted 4y ago
[deleted]
deleted 4y ago
[deleted]
quickthrower2 4y ago
If interest rates are 18% the crash will be so hard that some residences can’t be given away (in undesirable locations) because the tax and maintenance will be higher the home value, and the economy will be fucked. You will probably be out of work. If you can get a job as a liquidator and have lots of cash as it’ll be hard to borrow at all. The last black swan like that was probably before my time (1980s) but maybe the ERM debacle in the UK was close.
skellington 4y ago
18% implies a very high inflation rate, 15% or more. At that rate employers will be forced to give significant raises or else purchasing power would drop 50%+ in only three years. Employers tend NOT to match inflation, but they will have to give more than the usual 2-3%. Perhaps 10%, perhaps 13%, depends on the employer, but those higher salaries will send real estate to the moon even after the initial 50% dip. Of course these are extreme numbers and reality is not likely to get this extreme since "inflation" at the moment is primarily (lack of) supply side driven.
- cudgy 4y ago
  > Employers tend NOT to match inflation Eventually they’ll have to or people will be spending 100+% of their income on basic food and shelter with no way to afford getting to work.

bidirectional 4y ago

Yes, your opinion seems based on how the numbers sound rather than what they imply/mean. The United States reaching 18% interest rates would have absolutely massive effects, we've been in a low interest rate environment since the GFC and 10% has not been broken for ~40 years. House prices plummeting would be the least of it.