If mortgage rates remain at the post-pandemic average of 3.0%, it will neither help nor hurt affordability from this point.
To offset a rate rise to 4.1% (the pre-pandemic average in the above chart), home prices would have to decline by 13%.
To offset a rate rise to 4.9% (the high point in the graph reached in 2018), prices would have to drop by 21%.
If the inflation-worriers turned out to be right, and rates broke above their pre-pandemic range, perhaps mortgage rates might rise to 6%. This is not an outlandish number… it’s about 1% above the level reached in 2018, and is somewhat below the average rate for the decade of the 2000s. To offset the affordability hit from a 6% mortgage rate, home prices would have to drop by 30%.
None of these are predictions. (We think anyone who has a confident multi-year interest rate forecast is deluding themselves).
Rich’s four interest rate scenarios are kind of like Stephen Colbert’s frequent interview question: “George W Bush, great president, or greatest?”[/quote]
Whatever man. It says right there – in the part you quote! – that these aren’t predictions. They are illustrations of potential affordability impact IF rates were to go up. (I also included a neutral scenario to indicate that current rates neither help nor hurt, because they are already priced in to the affordability measurement).
Your statement in another comment above that I am making a “bold prediction” is similarly bullshit.
As to the rest. You know, it’s funny, I actually agree with a lot of the things you’ve written about interest rates, particularly your thoughts on how wealth inequality impacts inflation and real rates.
My main disagreement is with how useful this info is. For one thing, it’s backwards looking – who’s to say that those underlying causes won’t start to shift in the other direction at some point? And for another, it’s reductionist. This is a very complex puzzle; you are overly focused on one piece of it and seemingly don’t know or don’t care that the rest of the puzzle exists. I will note here that while you have a lot of good insights, you’ve also occasionally shown some pretty basic gaps in your knowledge of this general topic.
So all in all, while I find many of your arguments compelling, your declarative predictions about the future of interest rates strike me as ludicrously overconfident. As I’ve said before.
I don’t know why you’re trolling me here with your bad-faith reading of what I wrote. Are you trying to get me to argue with you about interest rates? Sorry, I don’t want to. You have all the answers already, so what’s the point?
