The interest rate drop will drive up the price of houses in areas where demand is still outpacing supply. That is the simplest way to look at it.
Everywhere else, where supply has caught up or exceeded, the interest rate drop will help buyers.
So lower rates, a wash at best for states like New Jersey but for states like Florida and Texas, it is helpful.
Overall, I think lower rates are still better. More money going to the sellers and less just to the banks. It will only cause a small change to tight markets like NJ but will help in places like Florida.
I see. That makes some sense. He didn’t explain that at all, just kind of said it and took it for granted that everyone would understand. Anyone who disagreed or asked for clarification was told to have a CAT scan because they were obviously brain-damaged.
I have the nicest Facebook friends.
BTW, we’re in Indiana. I have no idea what the housing market is like here right now.
The guy sounds like a complete ass and on top of that only has an incomplete understanding of the housing market. Of course I only have an incomplete understanding of the housing market, but at least I know it and will admit it.
Overall, nationally the housing market has cooled. Some state are seeing prices go down. IIRC prices actually fell in half the states following the annual spring time “hot market”.
NY, NJ, large parts of California and Oregon are still short on supply.
Florida and Texas are the two poster children for prices dropping. If anything both achieved overstock thanks to building and prices.
Oh, he is (a complete ass). He’s one of those guys I’ve known since college, so when you get a friend request, you tend to accept it. These days the only posts I ever see are when he’s raving about some horrible “leftist” thing or other. At least he’s not openly racist like a lot of my right-wing “friends.”
It’s disappointing how many people who I used to get along with have gone all-in for Trump.
Ultimately, most buyers buy a monthly payment, not a house price. If you can afford an e.g. $3000/mo payment, that’s what you’ll buy. Rates changes don’t change your budget.
When rates are low, that $3K buys a big, or at least expensive, house. When rates are high, it buys a much less impressive house.
When rates drop, buyers move upmarket. Or try to. And sellers bump their prices. Or try to. But immediately competition emerges on both sides of the deal. Which tends to reduce the Econ 101 effects the OP’s ranting FB friend was going on about.
And lower interest rates in overstocked markets, let more buyers in and helps these lower end buyers and those sitting on houses. This works well for Seniors downsizing and those wishing to move up to a larger house as they can now move their current house.
Rich people also own a lot of equities or other assets. And bonds. A prime rate of 20% would crush the values of all that stuff.
It would also crush one hell of a lot of businesses from small to medium up to gargantuan. Which is the other thing rich folks tend to own.
So no, a smart rich person doesn’t favor 20%. In fact you could use that question as an IQ or litmus test of economic / financial smarts vs. political BS-spewing.
Yep. This is why the Right talking point is “lowering interest rates is bad!” and all of the Right-minded people who blindly follow them do so to their own detriment.
Unfortunately for all of the older folks who are not paying a mortgage or looking to pick one up, and are not selling their homes, and are making lots of interest on their investments and HYSAs (my parents) are gonna agree
But thankfully there’s a goodly number of people who understand that while higher interest rates benefit them by the slightest of margins, lower interest rates are in the best interest of the economy as a whole.
What puzzled me was that he was specifically talking about the housing market, not about his investments. And before anyone nitpicks me, yes, I know that real estate can be an investment, but I don’t think that was his point.
Following the discussion a bit further as it has developed, apparently he believes that this will be just like the sub-prime mortgage crisis. Lowering interest rates will mean that a larger number of non-wealthy people will be able to get mortgages, which they will probably default on in a few years.
