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The real rate is 0.86% according to the Fed, which is historically cheap. In other words, if people get a mortgage loan at 6% and inflation is running at 4%, t
by state_less 3y ago
The real rate is 0.86% according to the Fed, which is historically cheap. In other words, if people get a mortgage loan at 6% and inflation is running at 4%, they’re not paying that much.
If inflation drops, and the Fed lowers interest rates to follow suit, they’ll refinance, so the only real risk at the moment would be that the Fed squeezes by raising the real rate.
That washes out speculators and put pressure on home sellers.
Money is still relatively cheap.
https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y
- ajsnigrutin 3y agoWhy are you looking at percentages? Percents don't matter... What matters is, how many monthly/yearly median wages does it take to buy a house now, compared to 30 years ago?
- sokoloff 3y agoBecause the calculation that governs the ability to make the monthly payments is heavily influenced by the interest rate on the mortgage. House prices are set by the marginal buyer and the marginal buyer is taking a mortgage.
- ajsnigrutin 3y agoBut the mortgage is highly influenced by the price of realestate. I live in a country where ~20 years ago an apartment could cost below 100k eur, and now is being sold at 300k+ eur. Yes, the percentages influence how much mortgage you can afford, but the fact that instead of borrowing ~70k, you now need ~250k influences it a lot more. (and no, the paychecks didn't go up not nearly as much)
- sokoloff 3y agoThe mortgage payment has a linear relationship with mortgage amount and an exponential relationship with the mortgage rate.
- ajsnigrutin 3y agoOf course, but is there currently an almost-global (at least in the developed world) problem with high interest rates, or that the base prices are way above what a median person can afford?
- sokoloff 3y agoIs the area of a room governed by its length or its width? Houses in seller’s markets are bid up based on affordability by competing buyers. This is governed by incomes of those buyers and interest rates.
- JumpCrisscross 3y ago> if people get a mortgage loan at 6% and inflation is running at 4% Incomes increased 4.8% annualised; “the national average 30-year fixed mortgage APR is 7.19%” [1], making the real rate 2.4%. [1] https://www.bankrate.com/mortgages/mortgage-rates/ https://www.bankrate.com/mortgages/mortgage-rates/