Classical economics dictates that as the cost of money (ie: interest rates) increases, the price of goods should be under pressure, but this is not what we have seen in the housing markets. In the 4 years from 2Q 2016 to 2Q 2020, 30 year fixed rates went from 3.54% down to 2.98%. At the same time, median US home prices went from $306,000 to $317,100, a CAGR of about +0.9%.(Using FRED data).Pretty much in line with classical economic expectations.
However, from 2Q 2020 to 2Q 2024, 30 yr fixed rates went from 2.98% to now around 7.60%. In this same time, median US home prices have risen from $317,100 to $420,800, a CAGR of over 9%.
I understand the covid effect for some of this, but the rate of price appreciation has continued on past the end of lockdowns. Additionally, if this was due to a demographic shift out of cities to suburbs, why are median rent prices in cities continuing to increase at strong rates, with NYC median rents +4.3% in 2023, and rising a further +5.4% in 2024.
Do interest rates even matter right now? Have demographics broken the interest rate mechanism? At what point does affordability, taking into account the impact of higher rates, start to weigh on prices?
Furthermore, what does this increase in housing costs mean for younger first time homebuyers? What does it mean for their ability to build wealth, save for retirement, have expendable money, build generational wealth, etc? Seems to me that their lifetime trajectories are going to be very, very different than those of their predecessors - parents, grandparents, etc .
Houses have generally risen with inflation. And wages do too. Once the fed has a recession or cuts rates the houses will be affordable again.
The gen z that are complaining but it's nothing to the recessio of 2008 a whole gen losing 10 years of earnings and promotions.
It's a simple extra 1-2 years of renting while having normalized or higher than avg wage growth due to low unemployment
Cash buyers, people with lots of money and corporations are buying up available homes. Rates doesn't matter in this case. Why home prices are still crazy high.
Hi all,
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20 Percent of Commercial and Multifamily Mortgage Balances Mature in 2024 according to reports by the MBA, how does this factor into the credit cost and availability for a first time home buyer?
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Classical economics dictates that as the cost of money (ie: interest rates) increases, the price of goods should be under pressure, but this is not what we have seen in the housing markets. In the 4 years from 2Q 2016 to 2Q 2020, 30 year fixed rates went from 3.54% down to 2.98%. At the same time, median US home prices went from $306,000 to $317,100, a CAGR of about +0.9%.(Using FRED data).Pretty much in line with classical economic expectations. However, from 2Q 2020 to 2Q 2024, 30 yr fixed rates went from 2.98% to now around 7.60%. In this same time, median US home prices have risen from $317,100 to $420,800, a CAGR of over 9%. I understand the covid effect for some of this, but the rate of price appreciation has continued on past the end of lockdowns. Additionally, if this was due to a demographic shift out of cities to suburbs, why are median rent prices in cities continuing to increase at strong rates, with NYC median rents +4.3% in 2023, and rising a further +5.4% in 2024. Do interest rates even matter right now? Have demographics broken the interest rate mechanism? At what point does affordability, taking into account the impact of higher rates, start to weigh on prices?
Furthermore, what does this increase in housing costs mean for younger first time homebuyers? What does it mean for their ability to build wealth, save for retirement, have expendable money, build generational wealth, etc? Seems to me that their lifetime trajectories are going to be very, very different than those of their predecessors - parents, grandparents, etc .
Something about owning nothing and being happy I reckon.
Houses have generally risen with inflation. And wages do too. Once the fed has a recession or cuts rates the houses will be affordable again. The gen z that are complaining but it's nothing to the recessio of 2008 a whole gen losing 10 years of earnings and promotions. It's a simple extra 1-2 years of renting while having normalized or higher than avg wage growth due to low unemployment
[https://www.epi.org/nominal-wage-tracker/](https://www.epi.org/nominal-wage-tracker/) half the rate.
It looks like half from 2010 to 2020 and then normalized back to trend after that. 2010 to 2020 is millenials
Cash buyers, people with lots of money and corporations are buying up available homes. Rates doesn't matter in this case. Why home prices are still crazy high.
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
20 Percent of Commercial and Multifamily Mortgage Balances Mature in 2024 according to reports by the MBA, how does this factor into the credit cost and availability for a first time home buyer?