5 ms·

The million dollar question is, how or will it ever affect real estate? Rents have spiked, and no one in my circles can afford to buy anything because there's

The million dollar question is, how or will it ever affect real estate? Rents have spiked, and no one in my circles can afford to buy anything because there's no inventory, and the little inventory there is is expensive (800k at 7 percent interest rates versus 750, say, at 3 percent a year ago). No one sells due to the low interest rate they're locked into. This seems like a big economic headwind.

cma 3y ago
Doesn't make up for the full rate, but $800k today is $664k in 2020 dollars.
- the_optimist 3y ago
  For some people who either got direct bailouts or were in the massive Covid-related windfalls, including direct purchases, loans, and scams. For many others, 2020 664k is still 664k. Massive wealth transfer.
  - cma 3y ago
    Inflation adjusted, median wages are slightly up over Q4 2019: https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q
    - the_optimist 3y ago
      It’s interesting to see this and consider if this is real growth. To some extent, a pig-through-the-python phenomenon is observable in various data sets. A less favorable interpretation is that: 1) the initial shock was so great that it massively distorted the median. quarters later, 2) we are now seeing nouveau riche, both corporate and personal, begin to distribute windfalls through consumption. I’d like to see the marginal Gini coefficient, and the change relative to historic rank-ordering.
AtlasBarfed 3y ago
Because it's impossible to build new housing stock! Impossible! I'm coming to the belief that the denial of housing construction is willful generational warfare. With so much "wealth" in housing values, the boomer voters resist any reform, and will sacrifice the next generations happily (just like they ALWAYS have). And well, it's probably just good old rent seeking of the most literal kind by the "ownership society". What the literal fuck has HUD been doing? This isn't even a project that the government should (theoretically) lose money on. You basically directly fund a shitton of housing construction directly. THEY SHOULD MAKE MONEY IN THE PROCESS! Could HUD literally build anything it wanted regardless of local building codes and zoning, because the Feds (interstate commerce) can trump local laws?
- gloryjulio 3y ago
  Yes. Just look at how they demonize commercial real estate decline. Real estate is the new feudal system to extract the values from the serfs
mikhailfranco 3y ago
Yes, higher interest rates should depress real estate prices, but in the short term, sellers keep prices high, buyers can't afford them, so transaction volume dries up. Those expensive places stay on the market for a long time. The exceptions are forced sales, due to death, divorce, unemployment or employment relocation. Even those may delay sale (e.g. bridging loans) if rates are expected to fall soon. Prices stay high, then collapse when a trickle of sales at lower prices resets expectations in a self-reinforcing downward price spiral. The overall effect depends on max holding duration of forced sales, compared to future rate expectations (related to the yield curve).

cma 3y ago

Doesn't make up for the full rate, but $800k today is $664k in 2020 dollars.

the_optimist 3y ago
For some people who either got direct bailouts or were in the massive Covid-related windfalls, including direct purchases, loans, and scams. For many others, 2020 664k is still 664k. Massive wealth transfer.
- cma 3y ago
  Inflation adjusted, median wages are slightly up over Q4 2019: https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q
  - the_optimist 3y ago
    It’s interesting to see this and consider if this is real growth. To some extent, a pig-through-the-python phenomenon is observable in various data sets. A less favorable interpretation is that: 1) the initial shock was so great that it massively distorted the median. quarters later, 2) we are now seeing nouveau riche, both corporate and personal, begin to distribute windfalls through consumption. I’d like to see the marginal Gini coefficient, and the change relative to historic rank-ordering.

AtlasBarfed 3y ago

Because it's impossible to build new housing stock! Impossible! I'm coming to the belief that the denial of housing construction is willful generational warfare. With so much "wealth" in housing values, the boomer voters resist any reform, and will sacrifice the next generations happily (just like they ALWAYS have). And well, it's probably just good old rent seeking of the most literal kind by the "ownership society". What the literal fuck has HUD been doing? This isn't even a project that the government should (theoretically) lose money on. You basically directly fund a shitton of housing construction directly. THEY SHOULD MAKE MONEY IN THE PROCESS! Could HUD literally build anything it wanted regardless of local building codes and zoning, because the Feds (interstate commerce) can trump local laws?

gloryjulio 3y ago
Yes. Just look at how they demonize commercial real estate decline. Real estate is the new feudal system to extract the values from the serfs

mikhailfranco 3y ago

Yes, higher interest rates should depress real estate prices, but in the short term, sellers keep prices high, buyers can't afford them, so transaction volume dries up. Those expensive places stay on the market for a long time. The exceptions are forced sales, due to death, divorce, unemployment or employment relocation. Even those may delay sale (e.g. bridging loans) if rates are expected to fall soon. Prices stay high, then collapse when a trickle of sales at lower prices resets expectations in a self-reinforcing downward price spiral. The overall effect depends on max holding duration of forced sales, compared to future rate expectations (related to the yield curve).