"negative rates distort everything" warren buffet. how about RE?

[George Gammon]

The gravitational pull of interest rates according to Warren Buffett.  How does this affect housing prices?  must watch video for real estate investors.  

click here for video of Buffett discussing interest rates 

[J. Martin]

@George Gammon , @Gloria Mirza, and @Nick L., great commentary.

With all this discussion of wages, home prices, interest rates, and qualification, I have to refer back to one of my favorite pieces of data that I haven't been updating lately: The Housing Affordability Index!

Here's some good historical HAI data I got together and analyzed mid-last year. I'll update it in not too long..

https://www.biggerpockets.com/forums/311/topics/190248-how-close-to-the-top---sf-bay-area-housing-affordability-analysis---by-me

Scroll down a bit and look at how interest rates impact home price qualification. A lot of support came from decreased rates.

HAI from November: (courtesy of Paragon's Patrick Carlisle's work, with link:

http://www.paragon-re.com/Housing_Affordability_and_Market_Corrections )

INTEREST RATES AND RE CYCLES

In regards to George and Gloria's comments regarding the direction of interest rates and RE prices, I think we really need to differentiate the short term from the long term, and what is going on in the background. In the short term, increases in rates can cause all kinds of counterintuitive behavior (buyers buying more at higher prices expecting even higher rates). When rates are increasing over a cycle, it's usually because employment and lending conditions are improving, optimism improving, more cash on hand, oftentimes more than offsetting higher rates.

What I think we can say with a high level of certainty, is that in any given economic backdrop, lower rates would very likely cause higher prices, and higher rates would very likely cause otherwise lower prices. Imagine if the 30yr fixed mortgage rate was only 2.0% instead of 5.5-6.5% during the peak of the last market, with everything else (optimism, super loose lending, etc) the same (ceteris paribus as they say in econ...) My god!! Things would have almost certainly gone crazier. Conversely, imagine if, under the same circumstances, rates were 12%. Would things have been different? I have to say almost certainly, at least one home would have sold for less! lol 

Inflation, Deflation, Fed Balance Sheet, Yield Curve, Graphs from prior conversation..
https://www.biggerpockets.com/forums/311/topics/28...