[quote=FormerSanDiegan][quote=carlsbadworker]
You are again using historical examples to predict future. Interest rate could rise not because of inflation, but because no one is willing to lend us money. I don’t believe Greek inflation ever topped 3% in recent years.[/quote]
I am not predicting the future.
Some people (such as the original poster) assume that increases in interest rates will automatically cause home prices to decline.
My point is that that this not what has generally happened over the past 50+ years. It does not mean that it cannot happen. But it is not a given, nor is it very likely.[/quote]
I think this post from Mish will explain a lot. One thing to note is that credit expansion has been on a tear since the early 80s. Yes, this affects prices of all assets purchased with credit. We also had more savings and much less debt, both public and private. We also had Baby Boomers who, compared to workers around the world, had much higher incomes than more recent generations of hopeful home buyers. Let’s also not forget women who entered the workforce in record numbers, increasing the purchasing power of households (until they pushed prices up so high, and reduced the purchasing power of individual earners, so that families were *forced* to have two income earners to buy what one income earner was able to buy just a decade or so earlier).
FWIW, LA experienced a significant downturn in housing after ~1989. We saw 40% declines *nominally* in some of the most desirable neighborhoods like Malibu, Beverly Hills, etc. Prices didn’t reach their peak 1989 prices (nominally!) until around 2000/2001.
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At some point, all of this debt that’s been accumulating has to be paid back out of future earnings. This will be a huge drag on the economy for many, many years to come, IMHO. The entire global economy is being propped up by govt guarantees, central bank purchases of junk assets, and artificially low interest rates. People who think this is a strengthening economy are fooling themselves.
