Re:The Great Steepening
by imtringued on Wednesday March 23, 2022 @04:55PM
(#30783239)
Are you joking? The Fed didn't invent liquidity preference and it also didn't invent low property taxes. When the government invests into a location, land value goes up over time as more people want to live there. Speculators start inserting themselves in the process and either occupy a plot that is bigger than they need (lots of homeowners) or outright own a second house/plot. The Fed can't solve that problem.
Really, when you raise the interest rate, the only difference is that some of the money is now going to the bank instead of the landlord. It doesn't make housing more or less affordable as affordability is driven by supply and demand.
100 houses and 200 people => affordability goes down, 200 houses, 100 people => affordability goes up.
By the way, I didn't say prices because affordability can be independent of prices. If you can borrow more from a bank, you still have to outcompete the next best bidder who also gets more money so borrowing more money doesn't make it easier to obtain a house in a popular location. Okay, I oversimplified it a bit, lower interest rates do make it more affordable to live in unpopular locations as some houses are going to be empty and thus very cheap regardless of the interest rate.
This whole thing about betting on higher and higher house prices is just sick. Make houses and its land lose their value over time, that's the only way out.
Really, when you raise the interest rate, the only difference is that some of the money is now going to the bank instead of the landlord. It doesn't make housing more or less affordable as affordability is driven by supply and demand.
100 houses and 200 people => affordability goes down, 200 houses, 100 people => affordability goes up.
By the way, I didn't say prices because affordability can be independent of prices. If you can borrow more from a bank, you still have to outcompete the next best bidder who also gets more money so borrowing more money doesn't make it easier to obtain a house in a popular location. Okay, I oversimplified it a bit, lower interest rates do make it more affordable to live in unpopular locations as some houses are going to be empty and thus very cheap regardless of the interest rate.
This whole thing about betting on higher and higher house prices is just sick. Make houses and its land lose their value over time, that's the only way out.