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I don’t think rent prices will be driven down by rate increases. We need a federal government initiate to be building dense/modern housing across the board. The

by cglan 4y ago

I don’t think rent prices will be driven down by rate increases. We need a federal government initiate to be building dense/modern housing across the board. The western world basically hasn’t been building enough housing since post ww2 and it’s biting us in the ass

vinyl7 4y ago
The fed fund rate won't, but increasing mortgage rates will. The fed is set to roll off their MBS holdings this month (starting tomorrow iirc), which should increase mortgage rates. People won't be able to afford homes at these maxed out prices when adding on the increase of interest rates, so home sellers will be forced to lower prices. High interest rates and lower home prices is a much better position to be in than vice versa.
- deanmoriarty 4y ago
  > so home sellers will be forced to lower prices. If I were an home seller not in distress (which, in this market and low unemployment rate, is still the vast majority of sellers), why would I want to lower prices for an asset I bought financing at a 2% rate? The latest news point to inventory actually decreasing as home sellers take homes off the market, waiting for better times (i.e. lower interest rates, which might happen in a few years).
  - refurb 4y ago
    That’s the fun thing - prices are set at the margins. You don’t need to sell your house for the value to go down.
    - lotsofpulp 4y ago
      deanmoriarty’s point is it is possible the supply curve shifts more than the demand curve mitigating price decreases. In the short term.
  - lamontcg 4y ago
    > in this market and low unemployment rate Unemployment will have to rise in order to reduce inflation. That will create more distressed sellers in a market where high interest rates and falling prices have dried up the motivated buyers.
  - vinyl7 4y ago
    Right, that's the big question. In a perfect world, people won't sell if they don't have to. And so we'll have to see how everything else plays out. With 2.5% interest rates, people have maxed out what they can afford for their mortgage and bought at the peak. Any disruption in peoples lives going forward is going to bring a lot of pain. I'm thinking about all the techies who get most of their TC from RSUs. When the recession starts hitting employment and the stock market, they are going to lose that income they accounted for when the mass home buying spree of the last two years happened.
    - deanmoriarty 4y ago
      I respect your opinion and believe me, I would be "happy" if it were to happen (I do not own a home and have been squeezed by my rent going up 15%+ a year, even though as a techie I'm still in a privileged position). But I do not think it will happen, there are too many people with too much cash who will be able to both weather a storm without selling their house AND scoop up inventory as it comes to the market. A lot of people with 2.5% interest rates are laughing in the face of inflation right now, they effectively got paid to borrow money and they are raising rents on their investment properties like crazy. I know because I work at a FAANG and it's literally the water cooler conversation of the year. Nobody worries about RSUs having gone down 30%, they'll just hold.

by cglan 4y ago

vinyl7 4y ago

The fed fund rate won't, but increasing mortgage rates will. The fed is set to roll off their MBS holdings this month (starting tomorrow iirc), which should increase mortgage rates. People won't be able to afford homes at these maxed out prices when adding on the increase of interest rates, so home sellers will be forced to lower prices. High interest rates and lower home prices is a much better position to be in than vice versa.

deanmoriarty 4y ago
> so home sellers will be forced to lower prices. If I were an home seller not in distress (which, in this market and low unemployment rate, is still the vast majority of sellers), why would I want to lower prices for an asset I bought financing at a 2% rate? The latest news point to inventory actually decreasing as home sellers take homes off the market, waiting for better times (i.e. lower interest rates, which might happen in a few years).
- refurb 4y ago
  That’s the fun thing - prices are set at the margins. You don’t need to sell your house for the value to go down.
  - lotsofpulp 4y ago
    deanmoriarty’s point is it is possible the supply curve shifts more than the demand curve mitigating price decreases. In the short term.
- lamontcg 4y ago
  > in this market and low unemployment rate Unemployment will have to rise in order to reduce inflation. That will create more distressed sellers in a market where high interest rates and falling prices have dried up the motivated buyers.
- vinyl7 4y ago
  Right, that's the big question. In a perfect world, people won't sell if they don't have to. And so we'll have to see how everything else plays out. With 2.5% interest rates, people have maxed out what they can afford for their mortgage and bought at the peak. Any disruption in peoples lives going forward is going to bring a lot of pain. I'm thinking about all the techies who get most of their TC from RSUs. When the recession starts hitting employment and the stock market, they are going to lose that income they accounted for when the mass home buying spree of the last two years happened.
  - deanmoriarty 4y ago
    I respect your opinion and believe me, I would be "happy" if it were to happen (I do not own a home and have been squeezed by my rent going up 15%+ a year, even though as a techie I'm still in a privileged position). But I do not think it will happen, there are too many people with too much cash who will be able to both weather a storm without selling their house AND scoop up inventory as it comes to the market. A lot of people with 2.5% interest rates are laughing in the face of inflation right now, they effectively got paid to borrow money and they are raising rents on their investment properties like crazy. I know because I work at a FAANG and it's literally the water cooler conversation of the year. Nobody worries about RSUs having gone down 30%, they'll just hold.