If you go back and look at the data from the late-70s and early-80s when inflation was really raging… housing prices went way up… despite the fact that interest rates went way up as well. Rents were going up at the same time.
Don’t get me wrong, I think it’s important to have sub-6% mortgage rates for the next 12-18 months as we clear out most of the foreclosure detritus, but I don’t think higher rates are going to have much impact on prices 2+ years out. May keep them from going up, but I think prices will be largely stabilized by then. And while some may say that buying now in anticipation of higher rates later is a “buying panic,” it’ll sure clear out a lot of inventory. Rightly or wrongly, anyone with a long-term view is more “payment sensitive” than “principal-balance sensitive.”[/quote]
But in the 70s and 80s, there was wage inflation, and the Baby Boomers were in their peak buying years. They were also more likely to have more stable jobs and healthcare/pension plans.
People today have to factor in job instability (making it less likely they can “hold on” through a downturn) and the increased need for savings for retirement and health problems.
I’m not sure we’re seeing any wage inflation in the near term, or do you think I’m missing something?
Also, if rates weren’t important, why is the govt willing to destroy our currency in order to get interest rates down to “save the housing market”?
