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Read the rest of the branch from my opening post. I'm not necessarily claiming that as my hypothesis, but the one that seems common among the replies. Basical
by taeric 3y ago
Read the rest of the branch from my opening post. I'm not necessarily claiming that as my hypothesis, but the one that seems common among the replies.
Basically, bottom line is people care about monthly payments. Interest rates going up means that the same houses have higher payments. You /could/ expect that prices going down would be enough to keep people happy to move. That is indeed what I was asking at the open.
However, stock going down means existing values goes down, which is just another form of trap for people. Specific trap being that many moves are leveraged on older equity, but to get out of the old loans will now require more cash.
This is largely because older equity was also under a leveraged loan. In markets that are not so heavily loan driven, the existing assets are straight forward to manage and convert into down payments on new properties. Housing is specifically not that.
If I'm misrepresenting that, please correct me.
- lotsofpulp 3y agoOnly a very small portion of people who bought at the peak would be “trapped” - i.e. underwater on their loans such that they would have to pay to sell the house. The vast, vast majority would be more mobile since homes are cheaper, and the cheaper something is, the less money you need to buy it. The government gave a gift to many people in the last 20 years of keeping interest rates near zero and pulling forward all that price appreciation. Unfortunately, the future generation might not want to expect the same treatment.
- taeric 3y agoThis feels like a corollary hypothesis? I'd love to see details, but from all the numbers I've seen, a majority of people have their equity largely converted into leveraged debt. It is more than a little terrifying, honestly.