Re:Home Price to Income Ratio
by nostrademons on Monday September 20, 2021 @06:07PM
(#28599643)
In practice, when interest rates went sky high in 1980 the price of home didn't actually drop very much. Instead, liquidity dried up. Nobody bought homes; nobody sold homes. The few people who had to sell their homes got screwed, but in general people rarely have to sell their homes unless they get transferred to a new office and don't have enough to buy a house there in cash (which is very attractive when interest rates are high; when borrowed money is expensive, houses get cheap to match what you can borrow, and if you happen to have money, you just don't borrow and take advantage of the cheap prices to pay cash).
Re:Home Price to Income Ratio
by throw123123123 on Monday September 20, 2021 @09:40PM
(#28601181)
It is common for people that can afford to pay the mortgage/house keep it even in a down market. IT makes housing crisis a lot longer to weather out because the vast amount of capital gets locked in an asset that does not yield its prices.
The bleeding ends up being slow, a decades wait to see any returns while maybe the stock market soars.
I am not very optimistic on homeowners in a downturn, UNLESS the government bails them out.
>> the declining interest rates that fueled past appreciation don't have much room left to move down, and that they'll be underwater on that huge loan if interest rates go up* and the value of the property declines.
The price you can charge for something is related to how much other people can pay for it. If houses are usually bought with loans (which they are), then the availability of loan funding is a major influence on the price of a house. When funding is plentiful -- another way to say this is that interest rates are low -- the price of a house will be high. When funding is hard to find -- or interest rates are high -- the price of a house must drop to compensate for that.