There is more to it. Higher interest decrease demand. And lower demand puts downward pressure on prices. But if you added a bunch of money to the money supply, you get inflation. So lower demand is more than offset by inflation pressures. late 70s was another high inflation period. Also price pressures also fueled by the historic low rates that lots of people have so the normal supply is also reduced. Prices are not up because interest rates are up.
Higher rates decrease demand but they also decrease supply. I own a store and if I have less demand I don't lower prices, I would go bankrupt. I actually can charge lower prices with more demand because I get bulk purchase deals from suppliers and more sales means I can scale and lower prices. Look at Walmart. They didn't lower prices because demand was lower. They lowered prices because they sold so much and get amazing deals from suppliers. If people can't afford new builds, builders won't lower prices they will stop building. Lower supply means higher prices as well.
The 10 year treasury is basicly what interest rates are based off. The problem is the FED can pretty much do whatever they want and it is up to them what rates are. It is all a guess of what they are thinking and looking at or what they want the world to think of them,.
.....I'm trying to start building spec, luxury near-the-beach houses in Florida (on the inland waterway, or off beach but the houses are 12-foot elevated).......bottom line....the total cost for a luxury house = $1.650mm..........absolute total.......the sale prices are $2.995mm +/-.........slam dunk million profit.......these deals work on paper all day long......and the houses are super small, steel frames and luxury build outs......WHAT IS WRONG WITH MY PLAN.....????........
@@investfourmore on paper, 6 months for entire process, but reality = 1+ yr....permit in Pinellas Co, is EZ, then a pier/piling process due to FL land....but the steel order is automated, and the steel co. builds the skeleton....build out, finish, done....REALITY kicks in....weather, workforce, component/supply chain.....you know that drill..........still a mill, profit net.....just gotta get there....(I'm trying to tie up 4 lots)....
Housing is less affordable because a lot of hedge funds are buying them up for rentals. I'm in CA and my 1994, $195k house is now worth $1.5 mil. There's not $1.5 mil of house/land - 6000 sq ft lot, 1900 sq ft house built in 1962.
Hedge funds own .5% of houses. They buy less than 2% of available homes... they didn't push prices up. California regulations and building codes and development restrictions pushed prices up.
Depending on where you live builders are not building starter homes at all. They're more interested in very luxury rentals instead of condos. And palatial homes loaded with amenities instead of homes for young families starting out. Just like they used to do.
That's mostly due to the government regulations and buidling codes. It's so expensive to build a house that they might as well sell a bigger one and make more money after all the upgrades they have to do
@@AberrantArt If there were 50 million people in 1950 in the US and 300 million today. If the same money supply was out there each person would have way less money. The more people there are the more goods there are and the more services there are. So more money is needed to handle all of those transactions.
@investfourmore what would happen if no money was printed, but instead the cost of goods fluctuated based on a fixed money supply? Second question, have you heard "The creature from Jekylle Island"?
@@AberrantArt the economy would go into a depression. profits would decrease, forcing wages down, forcing asset prices down, reducing the wealth of people by trillions, no one would start businesses and many would fail leading to mass unemployment
