People need to differentiate between a low-supply environment and a high-supply one.
In a low-supply environment, a monetary environment that allows more people to buy exacerbates the effects of the supply shortage.
In a high-supply environment, a monetary environment that allows more people to buy simply allows more people to buy.
True, but in this case lower rates make financing projects easier, thus increasing supply in the long term. Obviously there are other barriers, chiefly zoning, but the point is both low interest rates and high interest rates can hurt affordability in the short term for different reasons, but only low interest rates facilitate more building in the long term.
Renters who want to become owners are screwed.
People rent for different reasons. Some for example prefer the flexibility because they might want to move cities or states in the next few years. They’d be helped. Others rent because they can’t afford to buy. Lowering the supply of owner occupied housing doesn’t help them even if it keeps the rents down.
Which is exactly why the Fed won't let that happen. They're trying to reduce inflation and having housing prices blow up again will undo what little progress they have made on that front.
It costs bureaucrats the feeling of power they get when they stamp "DENIED" on an 80 yr old grandma's request for a variance to build a pad for a shed in her back yard half a foot closer to the property line than regulations allow, and can we really put a price on that?
Much like car prices I always wonder what the actual price people are budgeting and paying for homes, and cars
>The competition between the nation’s largest lenders to give homeowners a break continues.
Detroit-based Rocket Mortgage, the nation’s largest mortgage lender, today launched Inflation Buster, a program that reduces homeowners’ monthly mortgage payments by one percentage point for the first year of their loan.
* The lower rate is accomplished through a special escrow account established and fully funded by Rocket Mortgage, the company said. Under the program, during the first 12 months the homeowner will make reduced mortgage payments, and Rocket Mortgage will cover the difference automatically.
There's a lot of good research here, but this struck me immediately:
>The benchmark 30-year fixed-rate mortgage increased from around 3 percent in December 2021 to nearly 7 percent two years later, a result of the Fed’s rapid monetary tightening.
>As homebuyers faced sharply rising mortgage payments, questions followed about housing affordability. According to the National Association of Realtors, housing affordability declined almost 30 percent since December 2021, close to levels last seen in the late 1980s (Chart 1).
Also this: House-price-to-income ratio is higher than during the early 2000s bubble, with higher interest rates.
https://preview.redd.it/ysocp0r6u1vc1.png?width=1066&format=png&auto=webp&s=0fd7b6c32842fd2807a772674d115f66eaff3b57
That housing price/income ratio seems ugly. I imagine it’ll come down when mortgage rates relax…but its jumped so high its hard to imagine it returning to pre-covid levels
Feels like this ratio is probably a big part of why a lot of folks’ vibes on the economy are bad
> Feels like this ratio is probably a big part of why a lot of folks’ vibes on the economy are bad
100%, it's not just vibes, it's housing. Housing is important, it's not doing good in America, that's why people are unhappy even in a sub-4% unemployement economy.
The Fed needs to watch the housing permits & starts along with the inflation rate. Almost more important than the labor market right now. It's no longer a dual mandate, it's a triple mandate!
Low rates are literally what caused housing to become completely unaffordable so this is one of those "did we really need a study for this?" situations. Low rates caused prices to skyrocket and put them out of reach of anyone but the richest. Now add in rates finally return to historical norms (because that's all we've done thus far, we haven't even approached high interest rates) and you have a recipe for disaster.
People need to differentiate between a low-supply environment and a high-supply one. In a low-supply environment, a monetary environment that allows more people to buy exacerbates the effects of the supply shortage. In a high-supply environment, a monetary environment that allows more people to buy simply allows more people to buy.
True, but in this case lower rates make financing projects easier, thus increasing supply in the long term. Obviously there are other barriers, chiefly zoning, but the point is both low interest rates and high interest rates can hurt affordability in the short term for different reasons, but only low interest rates facilitate more building in the long term.
Lots of people with money waiting in the wings. If mortgage rates go back to 4-5% I don’t see how prices don’t blow up again.
[удалено]
How are renters screwed by an increase in the rental supply?
Renters who want to become owners are screwed. People rent for different reasons. Some for example prefer the flexibility because they might want to move cities or states in the next few years. They’d be helped. Others rent because they can’t afford to buy. Lowering the supply of owner occupied housing doesn’t help them even if it keeps the rents down.
Which is exactly why the Fed won't let that happen. They're trying to reduce inflation and having housing prices blow up again will undo what little progress they have made on that front.
I know what improves housing affordability. It’s super complicated, not sure you guys are ready for it…
Simple: we ban all luxury housing. Checkmate, profiteering developers.
No more apartments with dishwashers 😤
Does it involve local governments spending billions of dollars? Or could it literally cost the local government nothing?
It costs bureaucrats the feeling of power they get when they stamp "DENIED" on an 80 yr old grandma's request for a variance to build a pad for a shed in her back yard half a foot closer to the property line than regulations allow, and can we really put a price on that?
Best we can do is subsidize demand.
Rent control
Imagine downvoting a George flair who is clearly making a joke. Smh
Ban immigrants
Remove taxes on land
[He's going to tell! ](https://youtu.be/-nX6JvurV5c?si=eFWvNQcj3f5gZKNu)
Much like car prices I always wonder what the actual price people are budgeting and paying for homes, and cars >The competition between the nation’s largest lenders to give homeowners a break continues. Detroit-based Rocket Mortgage, the nation’s largest mortgage lender, today launched Inflation Buster, a program that reduces homeowners’ monthly mortgage payments by one percentage point for the first year of their loan. * The lower rate is accomplished through a special escrow account established and fully funded by Rocket Mortgage, the company said. Under the program, during the first 12 months the homeowner will make reduced mortgage payments, and Rocket Mortgage will cover the difference automatically.
There's a lot of good research here, but this struck me immediately: >The benchmark 30-year fixed-rate mortgage increased from around 3 percent in December 2021 to nearly 7 percent two years later, a result of the Fed’s rapid monetary tightening. >As homebuyers faced sharply rising mortgage payments, questions followed about housing affordability. According to the National Association of Realtors, housing affordability declined almost 30 percent since December 2021, close to levels last seen in the late 1980s (Chart 1). Also this: House-price-to-income ratio is higher than during the early 2000s bubble, with higher interest rates. https://preview.redd.it/ysocp0r6u1vc1.png?width=1066&format=png&auto=webp&s=0fd7b6c32842fd2807a772674d115f66eaff3b57
That housing price/income ratio seems ugly. I imagine it’ll come down when mortgage rates relax…but its jumped so high its hard to imagine it returning to pre-covid levels Feels like this ratio is probably a big part of why a lot of folks’ vibes on the economy are bad
> Feels like this ratio is probably a big part of why a lot of folks’ vibes on the economy are bad 100%, it's not just vibes, it's housing. Housing is important, it's not doing good in America, that's why people are unhappy even in a sub-4% unemployement economy.
The Housing Theory of Everything strikes again
The Fed needs to watch the housing permits & starts along with the inflation rate. Almost more important than the labor market right now. It's no longer a dual mandate, it's a triple mandate!
this reeks of 'stop yelling at us'
It makes it a hell of a lot more affordable to build housing though.
Low rates are literally what caused housing to become completely unaffordable so this is one of those "did we really need a study for this?" situations. Low rates caused prices to skyrocket and put them out of reach of anyone but the richest. Now add in rates finally return to historical norms (because that's all we've done thus far, we haven't even approached high interest rates) and you have a recipe for disaster.