4 ms·
The problem with homes is supply. Eventually rates will push some prices down, but without more supply there isn't going to be some big reset (~35% of houses ar
by matwood 3y ago
The problem with homes is supply. Eventually rates will push some prices down, but without more supply there isn't going to be some big reset (~35% of houses are bought with cash). A soft landing in this case could mean flat (+/- 5%) home prices for a couple years.
Those same higher rates also starve out new supply because it drives up cost of capital for builders.
I think if people follow the old house buying rule of planning to stay at least 2 years they'll probably be ok.
- AnarchismIsCool 3y agohttps://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST Housing starts are still pretty high right now (relative to post 08), though they could definitely be much higher. Rates don't seem to be impacting builders all that much, rather they were just making outsized profits in the lower interest rate years. IIRC labor supply was a bigger issue for them. The issue is that if you have 100 people and 100 houses, the price of any house is just whatever the construction and land costs. If you have 101 people and 100 houses, suddenly not even the sky is the limit. It's not that the 100 houses suddenly became better, they just became an existential land grab resulting in astronomical prices dictated by the absolute maximum the median person can convince a bank to lend them. If getting the money becomes more difficult, the prices will follow.