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How this effects housing prices: Housing prices are determined largely by what payments people can manage to make. At 3.22% (the approximate rate on Jan 1 202

How this effects housing prices: Housing prices are determined largely by what payments people can manage to make. At 3.22% (the approximate rate on Jan 1 2022) A $2000 payment can finance $462,000. At 7.7% (what google says is the current average rate) it would only finance about $280,000. At 12% (my personal guess at where rates will peak in about 18 months before quickly returning to around 7% for several years after that) it will finance $195,000. Additionally, there are very ignorant people that took out ARM loans even though interest rates were historically low. Those people will almost all face foreclosure in the next few years, very few people can afford to make a mortgage payment that is 3x what they signed up for.

abeppu 4y ago
> At 12% (my personal guess at where rates will peak in about 18 months before quickly returning to around 7% for several years after that) it will finance $195,000. Would you share some of the thought process for how you arrived at that guess? This is not at all my area and while I can understand how someone might guess "rates will continue to rise for at least a while longer" I don't really have an understanding of how / with what information someone would arrive at such a specific, multi-stage prediction (i.e. you picked a peak, when it will be reached, and what will happen after).
- ltbarcly3 4y ago
  The interest rate increases so far have not had any effect on inflation. This makes sense, the inflation is being caused by money that has already been injected into the market and the normal price corrections that an increased interest rate would normally cause is ironically causing losses to the fed itself as it bought basically the entire corporate bond market up during covid. I expect the fed to keep raising rates into an unresponsive market, getting more and more desperate. Secondly, we've seen rates higher than 12% during periods of much less inflation and a greater ability for the fed to curb inflation via interest rate increases (specifically the early '80s).
avgDev 4y ago
I guess fortunately for the economy 90% of loans are fixed-rate. There might be some deals to be had if the high rate is sustained for a few years.

abeppu 4y ago

> At 12% (my personal guess at where rates will peak in about 18 months before quickly returning to around 7% for several years after that) it will finance $195,000. Would you share some of the thought process for how you arrived at that guess? This is not at all my area and while I can understand how someone might guess "rates will continue to rise for at least a while longer" I don't really have an understanding of how / with what information someone would arrive at such a specific, multi-stage prediction (i.e. you picked a peak, when it will be reached, and what will happen after).

ltbarcly3 4y ago
The interest rate increases so far have not had any effect on inflation. This makes sense, the inflation is being caused by money that has already been injected into the market and the normal price corrections that an increased interest rate would normally cause is ironically causing losses to the fed itself as it bought basically the entire corporate bond market up during covid. I expect the fed to keep raising rates into an unresponsive market, getting more and more desperate. Secondly, we've seen rates higher than 12% during periods of much less inflation and a greater ability for the fed to curb inflation via interest rate increases (specifically the early '80s).

avgDev 4y ago

I guess fortunately for the economy 90% of loans are fixed-rate. There might be some deals to be had if the high rate is sustained for a few years.