2022 rate increases: What will happen to housing prices?
Investor · Chicago · Member since 2020 · 66 posts · 55 votes
2022 rate increases: What will happen to housing prices?
Most Popular Reply
@Account Closed
The problem with building in small towns, at least in small towns in MN. (I’ll be in Canby, Mn population 1600 for the holidays.) is existing homes (all 4 of them) are selling for between $55-$62/sf. What’s the cost to build new? Double? Triple that? I don’t know how you convince a bank to borrow you money unless you pay cash. And you better bring your own job because as desperate as they are for workers, it’s the $10/hr employee openings they have.
But I will agree with you on this part of it. I HATE hearing about how we have to make affordable housing in NYC or San Francisco. If I can’t afford to live there, why should people who make 1/4th of what I make be able to live there? Yes, those people should be told you make plenty of money to live in Vegas, or Bakersfield, or most of Florida and Texas. You don’t make enough to live in the most expensive part of America. And just because you were born here or moved here doesn’t mean we pay your way.
It’s like asking the mc Donald’s employee to pay more taxes so we can forgive the student loans of doctors, lawyers or other high paid individuals.
27 Replies
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes4y
Originally posted by @James Hamling:
Originally posted by @Russell Brazil:
Rates are just about a full 1% higher than they were a year ago. Would you say prices went up or down over the last year with those rising interest rates?
I think the most interesting question to ask/answer is; at what interest rate WILL it start to impact prices/ volume?
I personally believe given the relation to supply and demand, that slight rate increases will INCREASE not slow volume, and press prices more sharply up, as a motivator to action. And than, pressing prices up in such, actually act to press those originally not considering selling, into selling for capturing equity gains, thus adding to buying pool and adding fuel to the movement.
I believe the slow down will come more as a sudden stop than a decline. And with that, a panic in tenancy side as there is an arguably even larger supply shortage on tenancy side than ownership, driving prices up and with that, driving up investor interest (speaking on institutional investor side of things) thus driving more purchasing and unit demand.
I see numerous unit demand measures, very very few in any kind of relent to demand and there in price increases. I think we would need to see rates touching or topping 5/6% before any real impact to stem things and at that inflation level one has to start asking questions of ability for debt service on the dollar, thus "capping" any sizable increase to interest rate.
Is there a rate that would slow the market or impact pricing? Yes there is.
But there is a reason why every rising interest rate environment in history has also correlated to rising prices. Rates, and those that control them (Investors, Federal Reserve) are reactionary to conditions in the market, not the other way around. Those individuals will always be backwards looking instead of forward looking. Always have been, always will be. There will never exist the will to get in front of a pricing problem, whether its rising or falling prices. Those individuals will always react to what is, instead of being able to cause what could be.
The dog wags the tail, the tail doesnt wag the dog.
District Invest Group545 Reviews - Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes4y
@Michael Johnson rates are expected to go up - the average expectation is 3.7% for Q4. When you look at the last 40 years you can see that rate increases had no impact on home sales (number of units) but did have a slight impact on prices. I just posted the supporting data on my YouTube channel. As an agent I would say anecdotally that up to 4% we will see very little impact - not enough impact on monthly payments, buyers will absorb it. Once we get to 4.5% or more it will put pressure on prices and probably slow appreciation down substantially. The average expectation for price increase is 5.1% for 2022 - I believe that is too conservative, you'd have to adjust for whatever inflation will be. Expectations for sales volume are are, from 6.5 million to 6.8 million - so another record year by every standard, unless something totally unexpected happens.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.