UT: County housing market strengthening

[briansd1]

I believe that Rich is correct about the lack of correlation between interest rates rising and house prices dropping. House prices are sticky.

Buyers drive house prices. I do believe that when interest rates drop, house prices do rise because buyers can afford more on their monthly payments.

When rates are high, housing activity drops because people don’t feel pressure to buy because they can’t afford the houses that they want. Plus can earn a good return in other investments.

There is no guarantee that house prices will drop when rates rise. But house prices will definitely stagnate, activity will drop, houses will languish longer on the market, and there will be more choices.

[Rich Toscano]

Brian, that is a good explanation I think. Taking it a step further: maybe rising interest rates didn’t drop prices in the 80s because there wasn’t much forced selling, and so everything just kind of came to a standstill. But perhaps rising interest rates in an environment of forced selling would have very different results… ie, in that situation the rising rates could lead to lower purchase prices.

So I think we’ve identified why this time could be different — how a rate increase could lead to falling prices even though that hasn’t really happened previously. But I still don’t think that this is a given, because the govt can do a lot to halt the forced selling (as we’ve seen).

Rich

[Rich Toscano]

Brian, that is a good explanation I think. Taking it a step further: maybe rising interest rates didn’t drop prices in the 80s because there wasn’t much forced selling, and so everything just kind of came to a standstill. But perhaps rising interest rates in an environment of forced selling would have very different results… ie, in that situation the rising rates could lead to lower purchase prices.

So I think we’ve identified why this time could be different — how a rate increase could lead to falling prices even though that hasn’t really happened previously. But I still don’t think that this is a given, because the govt can do a lot to halt the forced selling (as we’ve seen).

Rich

[Rich Toscano]

Brian, that is a good explanation I think. Taking it a step further: maybe rising interest rates didn’t drop prices in the 80s because there wasn’t much forced selling, and so everything just kind of came to a standstill. But perhaps rising interest rates in an environment of forced selling would have very different results… ie, in that situation the rising rates could lead to lower purchase prices.

So I think we’ve identified why this time could be different — how a rate increase could lead to falling prices even though that hasn’t really happened previously. But I still don’t think that this is a given, because the govt can do a lot to halt the forced selling (as we’ve seen).

Rich

[Rich Toscano]

Brian, that is a good explanation I think. Taking it a step further: maybe rising interest rates didn’t drop prices in the 80s because there wasn’t much forced selling, and so everything just kind of came to a standstill. But perhaps rising interest rates in an environment of forced selling would have very different results… ie, in that situation the rising rates could lead to lower purchase prices.

So I think we’ve identified why this time could be different — how a rate increase could lead to falling prices even though that hasn’t really happened previously. But I still don’t think that this is a given, because the govt can do a lot to halt the forced selling (as we’ve seen).

Rich

[Rich Toscano]

Brian, that is a good explanation I think. Taking it a step further: maybe rising interest rates didn’t drop prices in the 80s because there wasn’t much forced selling, and so everything just kind of came to a standstill. But perhaps rising interest rates in an environment of forced selling would have very different results… ie, in that situation the rising rates could lead to lower purchase prices.

So I think we’ve identified why this time could be different — how a rate increase could lead to falling prices even though that hasn’t really happened previously. But I still don’t think that this is a given, because the govt can do a lot to halt the forced selling (as we’ve seen).

Rich

[Jim Jones]

[quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.

[Jim Jones]

[quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.

[Jim Jones]

[quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.

[Jim Jones]

[quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.

[Jim Jones]

[quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.

[scaredyclassic]

i believe things are different this time. I wonder sometimes if the nation is even capable of saving money.

[scaredyclassic]

i believe things are different this time. I wonder sometimes if the nation is even capable of saving money.

[scaredyclassic]

i believe things are different this time. I wonder sometimes if the nation is even capable of saving money.

[scaredyclassic]

i believe things are different this time. I wonder sometimes if the nation is even capable of saving money.

[Author]

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