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Fed potentially raising rates
Posted on 10/6/17 at 12:20 pm
Posted on 10/6/17 at 12:20 pm
Hey MT guru's,
I am no financial wizard but another thread on the board got me to thinking about the Fed raising rates due to full employment.
My question is this:
If the Fed raises rates too high, could this negatively impact housing markets?
For instance, right now people can buy 400k+ homes because rates are still really cheap. However, lets say the rates start to climb to 5-6%, the same people would be able to afford less house, reducing demand of housing, and reducing value of already bought homes.
The loss of value of those homes if impacted enough could leave homeowners upside down no?
I am no financial wizard but another thread on the board got me to thinking about the Fed raising rates due to full employment.
My question is this:
If the Fed raises rates too high, could this negatively impact housing markets?
For instance, right now people can buy 400k+ homes because rates are still really cheap. However, lets say the rates start to climb to 5-6%, the same people would be able to afford less house, reducing demand of housing, and reducing value of already bought homes.
The loss of value of those homes if impacted enough could leave homeowners upside down no?
6
Posted on 10/6/17 at 12:26 pm to 50_Tiger
I believe, yes. even a small raise rate will affect housing prices
Posted on 10/6/17 at 12:27 pm to 50_Tiger
Yes absolutely. Your house is an investment after all.
And that’s the point of raising rates to cool off the markets.
And that’s the point of raising rates to cool off the markets.
Posted on 10/6/17 at 12:32 pm to 50_Tiger
You're right, everything bought on credit/loans will become more expensive and drop in price.
Despite declining price levels and weak leading economic indicators, Yellen will still raise rates primarily just to screw Trump, in spite of clear economic factors & weaknesses that would dictate doing nothing.
Maintaining a minimum level of inflation is just a stupid idea without any political influence. At a 2% target inflation rate, that theory means the price of everything will double in 36 years, not to mention the short term more violent disruptions the Fed is about to cause.
Despite declining price levels and weak leading economic indicators, Yellen will still raise rates primarily just to screw Trump, in spite of clear economic factors & weaknesses that would dictate doing nothing.
Maintaining a minimum level of inflation is just a stupid idea without any political influence. At a 2% target inflation rate, that theory means the price of everything will double in 36 years, not to mention the short term more violent disruptions the Fed is about to cause.
Posted on 10/6/17 at 1:28 pm to 50_Tiger
You're only going to be upside down if you bought a house with the intention of flipping it before the notes piled up, IMO. No one is going to buy a long-term/forever home above budget, and as long as it's a fixed-interest loan I don't see how it hurts them.
Buying power shouldn't be affected either because as you said, higher interest should drive demand and cost down until they rebalance.
The only people at real risk are the speculators. Money has been too cheap for too long and it's caused multiple markets to inflate to unhealthy levels. Just because the housing market goes down for a bit that doesn't make it a negative impact. It's just a natural part of the cycle. Prepare accordingly.
Buying power shouldn't be affected either because as you said, higher interest should drive demand and cost down until they rebalance.
The only people at real risk are the speculators. Money has been too cheap for too long and it's caused multiple markets to inflate to unhealthy levels. Just because the housing market goes down for a bit that doesn't make it a negative impact. It's just a natural part of the cycle. Prepare accordingly.
Posted on 10/6/17 at 2:06 pm to 50_Tiger
There is a several hundred fold difference between bank deposit rates and mortgages.
.05 to 3.0%
I think rates can go up some without crippling the economy.
.05 to 3.0%
I think rates can go up some without crippling the economy.
Posted on 10/8/17 at 8:29 pm to 50_Tiger
Based on Yellen's comments I think they're going to skip the Dec hike and wait til Q1 or Q2.
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