4 ms·

What bothers me is that in Europe it was expected to affect the real estate prices. The higher the interest, the lower the prices, which sounds logical but...th

by alecsm 3y ago

What bothers me is that in Europe it was expected to affect the real estate prices. The higher the interest, the lower the prices, which sounds logical but...the prices kept increasing. So what's going to happen when Lagarde decides to lower them? The demand is way to high and the offer is almost non existent. And it seems that it didn't affect the inflation either. Bad years for everybody who's not getting a 10% raise every year.

r00fus 3y ago
Basically most humans. Hedge funds are doing great.
ASinclair 3y ago
One problem is that housing is supply constrained in many places. Homebuilders need loans too. So high rates increase homebuilders costs as well.
- Temporary_31337 3y ago
  Homebuilders are hesitant to set up new projects as the new builds will be more expensive than the already elevated house prices- higher labour and materials costs higher interest payments for the home builders And finally More expensive mortgages for the end clients. This kills supply and it will send prices into the stratosphere.
MuffinFlavored 3y ago
> The higher the interest, the lower the prices, which sounds logical but...the prices kept increasing. This is a side effect of "demand" I think. Higher interest rates increase mortgage/financing costs. This is supposed to "destroy" demand. Except, there's so much demand (and so little supply) that it didn't, and we're getting the worst of both worlds. In the US: A $500k 3/2 house at 2.75% 30-year fixed in 2020 is now $750k at 6.75% It "shouldn't" have played out that way but my theory is Home buyers from before ~2015 (random guess) are "up so much" in equity from this quiet "real estate inflation/demand appreciation boom" that they don't care to "overpay" $200k compared to what they would've paid 4 years ago because they were "gifted/given" $200k+ in equity out of the sky. They're just moving the money from one property to the next.
vundercind 3y ago
People with very low mortgage rates are trying really hard to avoid moving. Constrains supply.
jajko 3y ago
This explains what I am seeing in various parts of Europe too. Bad properties (mostly by location) experienced some swings (as they always do when some troubles come like in 2008), but better ones didnt even flinch and just continue rising (maybe only moderately when adjusted by inflation but still). Maybe a bit harder to sell but still they seem to sell. And everybody seems to expect interest rates to decrease soon, which will lead into even higher rise. But what do you expect - people in Europe generally dont use / trust / understand stock market, and real estate at least in past 5-6 decades was by far the best investment for common folks. Stuff they understand, can use, can physically see and hold. Plus in at least a bit touristy locations airbnb is helping massively with mortgage payments, and before 'communists' here come again with 'eat the greedy rich because we want our own houses too' - the demand from travellers is there, in past few years massive (and often hotels are simply not good enough for ie families with small kids while being 2-3x more expensive).

by alecsm 3y ago

r00fus 3y ago

Basically most humans. Hedge funds are doing great.

ASinclair 3y ago

One problem is that housing is supply constrained in many places. Homebuilders need loans too. So high rates increase homebuilders costs as well.

Temporary_31337 3y ago
Homebuilders are hesitant to set up new projects as the new builds will be more expensive than the already elevated house prices- higher labour and materials costs higher interest payments for the home builders And finally More expensive mortgages for the end clients. This kills supply and it will send prices into the stratosphere.

MuffinFlavored 3y ago

> The higher the interest, the lower the prices, which sounds logical but...the prices kept increasing. This is a side effect of "demand" I think. Higher interest rates increase mortgage/financing costs. This is supposed to "destroy" demand. Except, there's so much demand (and so little supply) that it didn't, and we're getting the worst of both worlds. In the US: A $500k 3/2 house at 2.75% 30-year fixed in 2020 is now $750k at 6.75% It "shouldn't" have played out that way but my theory is Home buyers from before ~2015 (random guess) are "up so much" in equity from this quiet "real estate inflation/demand appreciation boom" that they don't care to "overpay" $200k compared to what they would've paid 4 years ago because they were "gifted/given" $200k+ in equity out of the sky. They're just moving the money from one property to the next.

vundercind 3y ago

People with very low mortgage rates are trying really hard to avoid moving. Constrains supply.

jajko 3y ago

This explains what I am seeing in various parts of Europe too. Bad properties (mostly by location) experienced some swings (as they always do when some troubles come like in 2008), but better ones didnt even flinch and just continue rising (maybe only moderately when adjusted by inflation but still). Maybe a bit harder to sell but still they seem to sell. And everybody seems to expect interest rates to decrease soon, which will lead into even higher rise. But what do you expect - people in Europe generally dont use / trust / understand stock market, and real estate at least in past 5-6 decades was by far the best investment for common folks. Stuff they understand, can use, can physically see and hold. Plus in at least a bit touristy locations airbnb is helping massively with mortgage payments, and before 'communists' here come again with 'eat the greedy rich because we want our own houses too' - the demand from travellers is there, in past few years massive (and often hotels are simply not good enough for ie families with small kids while being 2-3x more expensive).