How inversely related are housing prices and interest rates? - Page 2 - TigerDroppings.com

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ZereauxSum
LSU Fan
Lot 23E
Member since Nov 2008
7914 posts

re: How inversely related are housing prices and interest rates?


quote:

The historical data seems to indicate that you might be able to expect about a 1% appreciation in real value per year (compared to about 6-7% for stocks), but even so, how much of that is consumption of a depreciating house that constantly needs maintenance, and how much of that is investment in the real estate upon which the house is constructed?


I agree with this, it's a difficult comparison to make. You can never really separate the consumption aspect. Even if you buy a house and keep it vacant, you still have to cut the grass, do roof repairs, paint, etc to keep it in mint condition. And you have to pay property taxes an insurance.

But I think that just makes it even less of an attractive investment. You don't have to do any of this with stocks or bonds.






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CajunAlum Tiger Fan
LSU Fan
Broussard
Member since Jan 2008
2402 posts

re: How inversely related are housing prices and interest rates?


quote:

It's something that's inherently difficult to compare to regular investments, because it's extremely difficult to separate the consumption aspect of homeownership from the investment aspect.

The historical data seems to indicate that you might be able to expect about a 1% appreciation in real value per year (compared to about 6-7% for stocks), but even so, how much of that is consumption of a depreciating house that constantly needs maintenance, and how much of that is investment in the real estate upon which the house is constructed?

When you factor in all the complications involving interest tax deductions, capital gains loopholes, insurance, landlord-tenant duties & responsibilities, etc., the big picture just gets more and more confusing.

Probably the best rule of thumb to go by is the multiple of home price to rental costs. When it gets too high, that's a red flag.


Nicely done.







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