4 ms·

Don't forget we have ~25% higher population than 1995 now too, so the current sales levels are quite worse than the even that 30 year low comparison. The good

Don't forget we have ~25% higher population than 1995 now too, so the current sales levels are quite worse than the even that 30 year low comparison. The good news is rates are slowly heading down to normalish (4-5%) range, but the era of free money (sub 3% mortgages) are unlikely to come back. If those rates do come back, it will not be pleasant as it will be the other side of a fairly large recession.

HPsquared 3y ago
Need to remember to subtract inflation from any interest rate, though. "Real interest rate" accounting for inflation. Edit: for example this one https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y
- nobodyandproud 3y ago
  Inflation fluctuates constantly. Mortgage rates are fixed for 15-30 years, unless one makes the mistake of getting a variable rate loan.
- putlake 3y ago
  This chart is based on forward inflation expectation, which is probably lower than actual. Ideally I'd like to see this chart until 10 years ago that compares the rate of interest on a US 10Y t-bond when issued with the actual inflation that occurred over the 10 years until it matured.
- judge2020 3y ago
  Main issue with taking inflation into account is that wage inflation doesn't exist, companies aren't giving raises every year to 'match inflation', if they do offer raises it's for retention and/or is performance-based.
antisthenes 3y ago
The reason 2023 year was so bad is that prices are lagging behind interest rates. In a liquid market, they have an inverse relationship, but it wasn't until Q3 of 2023 that prices actually started giving way. There's almost a 1-year lag, which resulted in high prices AT high interest rates. Reasonably, this affected purchasing decisions. Sales will pick back up again by Q2 2024.
- steveBK123 3y ago
  Exactly. RE prices are sticky on the downside. Some of it is logical (selling a leverage asset at a loss when you can just live in it / if you sell you give up your below-market-rate mortgage) and some of it is emotional (people like to win). So as mortgage rates approach 4-5% range (not that far off, we've already dropped from 7.8% to 6.6% in 2 months), homes will start moving again. People need to upgrade/downgrade/move/etc, and the marginal cost will start to compress and make it worthwhile again. As an example - I have a typical 2018-2020 ZIRP bottom barrel interest rates.. So while the apartment upstairs from me which is on sale for 25% more than my apartment purchase price, it would have actually cost me 75% more in monthly payments at peak interest rates. At current interest rates it is 58% higher payments, and at 4.5% it would be about 31% higher payments (pretty close to proportional to price). So I think somewhere in the 4-5% range things get pretty normal pretty quick.
BLKNSLVR 3y ago
> The good news is rates are slowly heading down Interest rates or the inflation rate? Interest rates haven't started heading down yet, whilst inflation rates are easing, they're still higher than desired. https://www.forbes.com/advisor/investing/fomc-meeting-federal-reserve/ https://www.forbes.com/advisor/investing/fomc-meeting-federa...
- steveBK123 3y ago
  Mortgage rates are down from peak https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US Which is what people buy based on
  - BLKNSLVR 3y ago
    That's very interesting. Mortgage rates dropped without a corresponding drop of the fed rate. In Australia the big lenders are in lock step with the reserve bank on rate increases, and lag behind on rate decreases.
    - steveBK123 3y ago
      Inflation is coming down, Fed is signaling they would cut without a recession in order to hold "real rates" as inflation drops, etc. Mostly a discussion as how many Fed cuts we see in 2024 now, not whether they will.
    - caeril 3y ago
      Mortgage rates are tied far more closely to 10y TSY yields than the FFR, and the 10y yield is predicting FFR rate decreases in the future.

HPsquared 3y ago

Need to remember to subtract inflation from any interest rate, though. "Real interest rate" accounting for inflation. Edit: for example this one https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y

nobodyandproud 3y ago
Inflation fluctuates constantly. Mortgage rates are fixed for 15-30 years, unless one makes the mistake of getting a variable rate loan.
putlake 3y ago
This chart is based on forward inflation expectation, which is probably lower than actual. Ideally I'd like to see this chart until 10 years ago that compares the rate of interest on a US 10Y t-bond when issued with the actual inflation that occurred over the 10 years until it matured.
judge2020 3y ago
Main issue with taking inflation into account is that wage inflation doesn't exist, companies aren't giving raises every year to 'match inflation', if they do offer raises it's for retention and/or is performance-based.

antisthenes 3y ago

The reason 2023 year was so bad is that prices are lagging behind interest rates. In a liquid market, they have an inverse relationship, but it wasn't until Q3 of 2023 that prices actually started giving way. There's almost a 1-year lag, which resulted in high prices AT high interest rates. Reasonably, this affected purchasing decisions. Sales will pick back up again by Q2 2024.

steveBK123 3y ago
Exactly. RE prices are sticky on the downside. Some of it is logical (selling a leverage asset at a loss when you can just live in it / if you sell you give up your below-market-rate mortgage) and some of it is emotional (people like to win). So as mortgage rates approach 4-5% range (not that far off, we've already dropped from 7.8% to 6.6% in 2 months), homes will start moving again. People need to upgrade/downgrade/move/etc, and the marginal cost will start to compress and make it worthwhile again. As an example - I have a typical 2018-2020 ZIRP bottom barrel interest rates.. So while the apartment upstairs from me which is on sale for 25% more than my apartment purchase price, it would have actually cost me 75% more in monthly payments at peak interest rates. At current interest rates it is 58% higher payments, and at 4.5% it would be about 31% higher payments (pretty close to proportional to price). So I think somewhere in the 4-5% range things get pretty normal pretty quick.

BLKNSLVR 3y ago

> The good news is rates are slowly heading down Interest rates or the inflation rate? Interest rates haven't started heading down yet, whilst inflation rates are easing, they're still higher than desired. https://www.forbes.com/advisor/investing/fomc-meeting-federal-reserve/ https://www.forbes.com/advisor/investing/fomc-meeting-federa...

steveBK123 3y ago
Mortgage rates are down from peak https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US Which is what people buy based on
- BLKNSLVR 3y ago
  That's very interesting. Mortgage rates dropped without a corresponding drop of the fed rate. In Australia the big lenders are in lock step with the reserve bank on rate increases, and lag behind on rate decreases.
  - steveBK123 3y ago
    Inflation is coming down, Fed is signaling they would cut without a recession in order to hold "real rates" as inflation drops, etc. Mostly a discussion as how many Fed cuts we see in 2024 now, not whether they will.
  - caeril 3y ago
    Mortgage rates are tied far more closely to 10y TSY yields than the FFR, and the 10y yield is predicting FFR rate decreases in the future.