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Interest rates are not that high currently. Sheesh you give people a taste of 2.5% and they act like 7% is usury.
by ethanbond 3y ago
Interest rates are not that high currently. Sheesh you give people a taste of 2.5% and they act like 7% is usury.
- armatav 3y agoIt’s literally usury.
- baggy_trough 3y agoWhat do you think usury is?
- TheSpiceIsLife 3y agoLending money out at unreasonably high interest rates. Which makes 7% usury.
- baggy_trough 3y ago7% is not unreasonable by any stretch of the imagination.
- armatav 3y agoDo the math and tell us the income you'd need for a $1,000,000 house at prime. It's unreasonable. Pay a loan to term one of these days and you'll see why.
- thunky 3y agoDon't buy the $1,000,000 house if you think it's too expensive. It's only (over)priced that way because rates were low and prices haven't adjusted to current rates yet.
- TheSpiceIsLife 3y agoI don't think those are the only reasons house prices are high now. Why don't you try telling the whole truth.
- baggy_trough 3y agoHouse prices are high because governments are printing money like mad.
- thunky 3y agoYou're right I shouldn't have said "only", but in my opinion it's the main reason. And of course there are several reasons rates move. When rates were around 3% not so long ago, the monthly payment on a $1M loan was around $4k. Now at current rates the monthly payment is closer to $7k. As a buyer, that's pretty hard to shrug off. It ends up eliminating entire classes of buyers just like it added them when rates were going down.
- Turing_Machine 3y agoMortgage interest rates have been far, far higher than 7% in the past. In 1981, the average mortgage rate hit 16.63%. The rates were higher than 7% all through the '70s, '80s, and most of the '90s, not dropping below 7% until 1998.
- TheSpiceIsLife 3y agoI know, I was there. My first job back then paid $4.75 an hour, and I bought my first home for $37,500. So go on, keep fucking telling me things were harder back then.
- ethanbond 3y agoNobody is saying things were harder they’re saying interest rates aren’t the problem. Note the principal on your first home.
- armatav 3y agoIt’s definitely the interest rates in combination with incessant printing into inflation. How do you think the principal got higher, magic?
- ethanbond 3y agoBy not building homes at anywhere close to the rate of population growth. It's so obvious by looking at the data you'd be gobsmacked anyone is talking about anything else before simply building more houses. Eliminate most zoning, bring in labor from outside the country, train up domestic labor, create incentives for construction and construction tech, so on and so forth. There simply aren't houses. Inflation doesn't help, but housing prices have risen way faster than the rate of inflation. So again: find the actual problem and solve it.
- armatav 3y agoWhy do you think neighborhoods with single family homes that have insanely high appreciation don’t want new houses built? Because it’s their only high growth asset, and their largest. How did it get that way? You can go step by step through this process of root cause analysis and see that it is because our money is weak.
- ffgjgf1 3y agoJust like 7% inflation isn’t that bad because it could be a whole lot worse?
- jowdones 3y agoLook, a 10% interest rate isn't that much on a $10,000 personal loan. But that doesn't even buy you a new car today and for a measly apartment in a major city you gotta be prepared to spit in the vicinity of $1,000,000. This insanity has to stop, hence the high interest rates.
- ethanbond 3y agoThe prices are high. Not the interest rate. And yes the distinction is important because the solutions to each problem is different.
- ffgjgf1 3y agoNot sure high interest will result in any meaningful decrease in real estates prices. Best case they might stay stagnant for a few years which would allow wages to catching up a bit.
- sidewndr46 3y agoI mean it could be worse, the government could declare the old currency is deprecated and that we can only convert $2000 USD into the new currency.
- thatoneguy 3y agoI can’t tell if you’re being sarcastic or not but the jump from 2.5% to today’s 8% doubles the monthly payment, so I can see why people complain about it.
- darth_avocado 3y agoThat’s a ridiculous statement. It’s not the rates that matter but the monthly payment. A 800K mortgage (which is a very reasonable number in most cities), would be a 3K/month payment @2.5% but 5.6K/month @7.5%. So excuse me if I complain about having to pay almost twice the amount. People like to give the example of high interest rates in the past and how that was fine, but often forget to account for the fact that home prices were low, home ownership numbers were high (thus stable supply/demand), income to cost of living and income to cost of housing ratios were much more reasonable than today. So yeah, high interest rates work in different conditions but not in the distopia that exists today.
- ethanbond 3y agoRight but in that case the housing price and not the interest rate is the problem, isn’t it? Housing prices: record high Interest rate: pretty moderate Problem: the pretty moderate thing? The solution to either of these problems is different. Answer to high housing prices: build more. Answer to high interest: lower interest, which then inflates housing prices, which without more building means just more people priced out. The issue is prices which is an issue with supply.
- darth_avocado 3y agoI agree but with a caveat. My original comment (the parent on this thread) was about supply. Ideally moderate interest rates are not a problem, but when you get there by aggressively hiking the rates after a decade of low rates, it becomes a problem. Mostly because anyone who didn’t benefit from the environment (90+% of the population), will have a hard time catching up even with moderate rates.