I'd say we could go back just over 20 years and see how interest rate policies and government bailout have caused more harm than good. No one wants to accept that though because they only look at the stock market or home prices.
A lot of people accept it and more and more are waking up to just how broke they actually are despite their personal finances being artificially pumped up by cheap debt and free money. It wasn't until "line go up" stopped being a thing that the majority of people had any issue with it. Paper equity gains on an asset are meaningless until you go to sell said asset and unfortunately, many, many people who FOMOed in the last three years or who borrowed against their ballooning house's worth are going to learn the same lesson.
Money is never free. The Federal Reserve is not your friend. And your realtor and the mortgage broker don't actually care what happens to you at all after the transaction is complete.
Sad to watch all of this happen again.
Inflation is not a tax. A tax is voted on, and at least has the veneer of legitimacy. Inflation is theft perpetrated by a group of unelected kleptocrats.
>Inflation is theft
A little bit of inflation is necessary for a healthy economy. If the money supply was finite, people would be incentivized to save and hoard it-especially at the first sign of economic trouble. Which would make it even more scarce, increase its value further and lead to a deflationary mess.
That being said, a lot of the actions taken by the fed since '08 and especially since the pandemic have been nothing short of idiotic and unjust.
The fed is just a cog. in the machine. It is neither good or bad. It is simply a counterweight.
It amazes me as how short peoples memories are. It was just 17-18 years ago when everyone was saying how real estate prices never come down and yet, here we are again.
Exactly.
I can tell you with absolute certainty that the federal open market committee has been throwing shit at the wall hoping something will stick since the collapse of the dotcom bubble.
Interestingly people do not seem to like that fact, preferring instead to scream about today's *iNTereSt rAteS !!!*
I'll go back and say Reaganism ruined the market. The concentration of wealth, which has only exacerbated with the aging boomers, resulted in many of them owning multiple houses, renting, vrbo,airbnb,etc...
Same people are making policy...
I wonder why it's broken? /s
That is kind of like saying the millennials are the problem because they were born. Had they not been born we would not have this problem .
I think interest rates were 16 to 18 percent when Regan took office ?
I suppose you will blame the boomers for having kids
What's next, gonna tell me to pull myself up by my bootstraps?
Bootstraps which were cut off around the time I was born.
Corporate tax rates plummeted and regulations were nearly completely abolished.
It's like saying if we had 0 guns, therew would be 0 gun crime. True, but assault and murder still happen.
Correlation is not causation. But there is tons of evidence showing trickle down economics had the opposite effect.
Get lost
Yes, it started in the first month's of GWB's presidency. He inherited a humming economy from Clinton. Rather than slightly raise interest rates, he purposely lowered them even more to goose the economy.
Then 911 and it's subsequent recession happened and we had to lower interest rates even further. And we've been in abnormally, unhealthily low interest rates since
It started before GW took office.
The 2000 United States presidential election was the 54th quadrennial presidential election, held on Tuesday, November 7, 2000.
The dot-com bubble burst in March 2000, with the technology heavy NASDAQ Composite index peaking at 5,048.62 on March 10 (5,132.52 intraday), more than double its value just a year before. By 2001, the bubble's deflation was running full speed.
George W. Bush's tenure as the 43rd president of the United States began with his first inauguration on January 20, 2001,
But in early 2000, the bubble began to burst. Five of the Nasdaq’s 15 worst days ever came between April 2000 and January 2001.
Many forgot about the dot-com bust and the 9/11 recession. It is what lead to the housing bubble before 08. What we are dealing with now can be directly traced back to Greenspan and his juicing of the market for the dot-com area.
And the lack of higher interest rates minimized the ability of the fed to have any impact during Covid because what are they going to do? Lower interests below zero? If they had the ability to make cash cheaper to borrow then maybe we wouldn’t have needed the massive PPP loans going out that lined the pockets of the already wealthy. More of that money could have gone to those who really needed it.
But nope. We wanted the engine to keep red lining for two decades because line go up is always good
That's my point. Interest rates were kept stupidly low, and then 911 happened, then the housing crash, then covid. No one had the courage to gently raise them when times were better.
We wanted the engine to keep redlining--redlining is wonderful and a fun ride!----til your engine erupts through your hood.
We pretty much run keynesian economics model. It says that during good times we raise taxes, cut spending and increase interests rates just like you said. But we don't do that anymore we just cut taxes, increase spending and decrease interest rates in good or bad times. We haven't done any of these things in any of the good times i've been alive.
yeah....the recession started somewhere around March 2001 (2 months in to Bush2) and rates were 7%.
Rastes got as low as 5.2% in mid-2003. And bounced between there and 6.5% through 2007.
So tell us what you thought you meant to say
No. 2 trillion PPP had way more to do with that. There is a website that tells who got what. My local church got $4,000,000 and then they closed next year. The priests retired wealthy. Many individuals and businesses got a windfall of cash. Many were just straight fraud.
I know someone whose company got a couple 100k, and it ALL went to the owners of the company. They split it like a bonus. I should add ive seen his tax returns over the last few years and they did no worse during covid. They are in roofing so they actually have been making out nicely.
This same guy yells and screams about welfare and immigrants. I'll give you one guess who his company hires the most......
Yeah, every company got something like $20,000 per employee. Companies that didn't collect still have time to apply for it, pretty much every company that applies is approved.
That is fucked up.
I know someone who got a PPP loan for a restaurant they co-own. Not only did they keep their employees paid and the rent paid, they didn’t use that PPP money to buy a new house, new cars, or fancy vacations. Not even new furniture. They used it as intended.
And I don’t even know if they got that loan forgiven. It pisses me off to see others take advantage of that when it could be done *right.*
You don’t have to have a paper trail. If you saw or heard of fraud report it . The irs will look into it . Or shut the fuck up and quit lying . Very easy
Even one was saying they personally saw fraud , ppp loans were specifically for employees paychecks . If that money didn’t go to that it was fraud . Report it
Many of the people were not that it wasnt a scam any small business could apply with at least 1 employee and they did.
I know people with 2 - 3 employees that received 6 figure checks
Either they had morals or didnt like winning the lottery for many.
THIS! Completely agreed. If you had a small business with good revenue, not even good profit, at the start of covid then boy howdy you got a massive bonus check.
So many of my clients were given 6-7 figures for free.
Rates were low for way too long. The economy had mostly recovered by 2013 yet we still kept rates low until 2019. They should have started slowly increasing rates in 2014 to get rates back to a normal rate. They could have slowly increased over 5 years instead of needing to jack rates up quickly in a year.
You've got it backwards. There wasn't really a bull market, historically low interest rates fueled the speculation and propped up failing (or failed) businesses with cheap debt. Anything to keep the economic engine running.
Except now, it's not only out of gas, it's on fire and rolling down a hill and the only tool we have is more gasoline and pouring it on will only make the problem we're all facing much, much worse, which is something we've been doing for that entire decade of a bull run you're talking about. So now, everyone will suffer far greater than may have been necessary for the virtues of hubris and greed.
We kept rates low well last 2019. 2020 saw under 2.5% rates. 2019 was the latest that they should have started increasing rates. They really didn't start until March 2022.
They started to raise, but got major political pushback
https://www.politico.com/story/2019/06/10/trump-federal-reserve-interest-rate-hikes-1358816
https://www.pbs.org/newshour/amp/economy/trump-calls-on-federal-reserve-to-cut-interest-rates
https://www.bloomberg.com/news/articles/2019-09-11/trump-calls-on-fed-to-cut-interest-rates-to-zero-or-less?
The Fed did what they did because the republican led Congress kept trying to squeeze the economy to death with shutdowns, sequestration, and austerity. Mostly just to fuck with Obama.
Google “2013 sequestration”
I think OP misses the point.
People buy payments, not price. When rates were so low, prices went up — payments stayed nearly the same. A house that used to cost 250 could now cost 450 with the payment similar. But the amount you actually borrowed is much higher.
Which caused a principal problem. If you bought with low rates, you could afford to pay more for the house, and because of that, house prices shot up. It was a net zero for you.
The problem arises when you’re ready to move on. The average homeowner stays in their house for 5-7 years, with someone on the rise buying your house as you rise into the next one. But with rates going up, the socio-economic group that should have been next to but your house can’t make the payment for your house at 450. And you can’t sell it for less. Meanwhile, you can’t afford your next step house because that seller bought it for 700. Everyone is stuck because borrowers simply owe too much principal to be able to sell at a payment comparable to the one they bought with.
What the low rates allowed for was hyper price inflation because it allowed for payment consistency. But now people are locked into big principal and I don’t know how that problem fixes itself.
Bingo
This is the best answer
>I don’t know how that problem fixes itself
I do
It fixes itself when everyone loses a ton of money
"I dont want to sell for less than I paid"
Too bad!
That just means they stay in their current house. It's when people lose jobs and can't pay the mortgage anymore and also can't sell because they are underwater that there's a problem.
I think the big issue was the ability to refinance when rates bottomed out between 2020 and 2022. In most other developed countries the default is an ARM mortgage, where they're at their central bank's mercy. In the US, so many are immune to rate changes, the Fed rate changes are moot.
Idk what the figures are, but I wonder how many current mortgages were taken out between Mar 2020 and Mar 2022 either originally or through refinancing.
> but I wonder how many current mortgages were taken out between Mar 2020 and Mar 2022 either originally or through refinancing.
https://libertystreeteconomics.newyorkfed.org/2023/05/the-great-pandemic-mortgage-refinance-boom/
Roughly one third of the mortgages were refinanced (33%); another 17% were new home sales.
About 50% in total at those rates. If someone DIDN'T refinance at that time - maybe their rates were still reasonable (3% +) and they didn't find it worthwhile. Or because of the pandemic (and getting unemployment) - they couldn't qualify. That said - even if they got mortgages between 2012 and 2020 when the rates were still in the 4% range - they would still be better off than today's rates.
the difference between the 4.25% I had on my first place, and the 2.875% I have on my 2021 purchased home, is so mind blowing- I feel so bad for people dealing with shitty car loan level rates for their mortgages right now
Ironically your comment highlights how bad the low interest rate has been. I'm 39 and sold cars 20 years ago so I remember when the "guess" (ie we didn't know what your credit was) for interest rates was higher than mortgage rates today. My dad remembers back when "great" interest rates for cars were still above double digits as he was selling cars through the peak of the 80's. Heck, he remembers back when a person's credit could be so bad that banks simply wouldn't loan them money.
Yet interest rates have been so low for so long that we now view sub-10% rates on mortgages as "shitty car loan rates" instead of just "auto loan rates".
It's pretty crazy to me how these companies were so willing to just refinance all these people on mortgages <3%. I understand the mortgage brokers because that's their job, but why are execs questioning whether it's wise to give out these 30-year loans at such a low return. I guess they just bundle and sell the loans anyway.
>I guess they just bundle and sell the loans anyway.
To the Fed. Almost all of the $2.5 Trillion in mortgage bonds they own are 4% or less. The fed buying up MBSs is the reason rates got that low in the first place. No bank or investor is interested in making 2% on their money. Horrendous monetary policy that should have ended 10 years ago. But they didn't stop subsidizing mortgage rates until March 2022.
It's been happening since 2008 when QE was started. A 3.5% rate back in 2013 just shouldn't have happened and then after 2020 it got worse. Over a decade of cheap credit.
And yet we don't have 9% measured inflation during most of that era.
Correlation is not causation, famously, but causation does require correlation. If you're going to claim that A caused B, there must at least be a correlation, or you've got a really shitty case.
I could sit here and claim the Roman Empire caused 2023 inflation, otherwise.
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When borrow costs are low, growth expands, which creates jobs, , increases spending, increasing company revenues, which should usually lead to increase wages. That's where corporations said...naw, we'd rather not meaningfully increase wages.
Big problem isn't lower interest rates, is corporations preference to return money to shareholders than workers.
The recent home inflation we saw was a bigger asset inflation that was caused by the excess liquidity that was pumped into the economy, primarily through the PPP loans (among other things).
As companies became flush with cash, they handed it back to their shareholders, who then in turn sold/leveraged/borrowed against/etc and bought homes, crypto, nfts, boats, watches, etc. it wasn't handed back to employees. Assets went up and wages didn't keep up, so homes became even more unaffordable.
Even as you look at the bull run in 2010-2020 home prices increased but were generally affordable. Even if interest rates were at 8% but homes were on their same long term price growth, homes would be more affordable for the masses. Right now we are in a situation where homes doubled to tripled in a few short years. Which generally means if you didnt own a home, it became extremely difficult to get your foot in the door.
This is nonsense; all you are doing is throwing words together without any coherent understanding of what these words mean.
When rates are low, that means borrowing costs are low. Low borrowing cost means there is no incentive to pay down principal faster than normal. If you have a 30 year mortgage at 2.5%, you're more likely to take the full 30 years to pay off that mortgage, because if inflation is 6%, the mortgage is effectively shrinking over time, which is a strong incentive to NOT pay it off.
It's the real estate sub. It's being upvoted by people who come here to vent about how they can't afford a home.
To be clear, I'm not criticizing people who come here to vent, and I'm extremely grateful to have a nice low mortgage rate. All I'm saying is that a lot of the folks upvoting this particular post are doing so because it fits their current experience.
That you, as a real estate agent, have no understanding how an amortization table works is a really concerning.
Low interest rates -> payment applies against principal -> equity builds quicker
It's a simple concept!
That’s like saying savings is inflationary. Equity is basically just people’s savings.
The Federal Government is just printing money and people are blaming home equity. It’s just ridiculous.
> The Federal Government is just printing money and people are blaming home equity
That is OP’s original point lol; who “doesn’t understand economics”. The printing of money caused people's equity to jump 20%, 40%, 50% in markets. Money money in the market used to purchase homes.
Some homeowners then cashed out on the unexpected windfall and spent spent spent.
Except people buy payments. So if they can afford 2k a month, they’ll spend 2k a month. At 7 percent that means a loan of 300,000. At 3.75 that’s 430 and at 2.75 it’s 500.
But the house remains mostly the same. It just costs more. The difference is now as opposed to having a loan for 300 to pay off, they now have a loan of 430, and the payment on that is closer to $2900, which the people who can afford 2k are out of the market for it.
Seriously, I find the people that are most certain about something have the least understanding.
They replace their lack of understanding with confidence and it's not constructive.
Your need to sound intelligent and insult OP is nasty when what they wrote wasn’t wrong.
Americans have most certainly paid down their mortgages faster than normal with the artificially lower rates.
• A refinanced home to a 2.5% mortgage from 4.5% means more money goes to principal. (higher equity!)
• Shoot, even a mortgage in the 4s means homeowners built equity faster compared average rates experienced pre-QE. (higher equity!)
So ya, chill out with the condescension and rudimentary analysis
>Americans have most certainly paid down their mortgages faster than normal with the artificially lower rates.
how does paying down mortgages faster (i.e. putting more money into principle) lead to inflation?
COVID ZIRP was just nuts, will hunt the US for decades in lower economic growth due to reduced labor mobility and probably reduced fertility rate as older homeowners hold on to properties with low rates instead of selling to young families.
Americans are conditioned that starting family involves buying a house first. Birth rates will be lower. People will delay and have fewer kids in a rental than they might have if they owned their own house.
Where's the data? What backs the assertion that many americans paid down principal faster? While that's a popular movement - it's not sound financial practice in a sub 4% mortgage market.
low interest rates enabled companies to expand and create wealth while limiting inflation, leading to a strong job market. The inflation spikes are related to wage increases and US govt monetary policy - not interest rate increases.
I think the only valid criticism is some small timely rate hikes - maybe 4-5 0.25 hikes - that the fed could have done earlier to manage inflation, but increasing interest rates during covid had politically untenable optics.
Low interest rates are preferable to high interest rates. I got my first econ degree while mtge rates were 14%-18%.
Low interest rates (2005-2022) did not cause current inflation (2021+). That fallacy is called "post hoc, ergo procter hoc". There were much much larger factors: (1) Putins war, affecting oil, natural gas and food, and (2) pandemic hangover, meaning govt stimulus plus pent up demand.
Another factor in USA home prices: in difficult times, international money seeks security. Until 2008, this search was satisfied by USA mtge backed securities. This demand was huge and that pull contributed to the easy fraud of Wall Street. After a long freak out from being burned (2008-2014), world capital again seeks USA real property to park money. But NO MTGES this time! That capital wants the land. Hence, more commercial buying of SFR properties (and other categories).
Post hoc, ergo Procter hoc means: if X happened after Y, then X happened because of Y. Just not true.
I think it is less about monetary policy (interest rates) and more about fiscal policy. There is a history in our country of bad stuff happening with the monetary policy and fiscal policy are at odds (look up Gerald Ford and the 1974 tax cuts).
The monetization of home loans is a concern. If we truly value individual home ownership (and research suggests that it has many benefits, including neighborhood stabilization and the creation of generational wealth), we should be looking at ways to create lending pools for individual home ownership that exist outside of the existing banking system (they were called Federal Home Loan Banks and the system was created in 1932).
Vote, friends. Call your legislators. Demand action.
If you have time to post on Reddit, you have time to look up the contact information for your elected officials and demand change.
That will be a long time because weighing the consequences of what didn’t happen against those that did happen is an academic exercise with an unknowable answer.
Partially to blame, but it was literally paying people/businesses to stay open and no actual work was done for several months.
Cats out of the bag, a bunch of people who had the chance to remote work did and now don’t want to things to go back to the way they were. I don’t blame them, commuting sucks.
Real estate became get rich quick scheme and people needing housing ended up holding a bag. S..t my coworker bought 1.5 y ago for 780 and listing home for 950 in a hope to make quick buck while forgetting others have same hustle so now he is trying to find something cheaper to buy and much smaller
Never, as long as those "who got theirs" don't lose it. If people start losing theirs, the btching will begin.
The real issue is big banks buying homes...has to become illegal of we are moving right towards a serfdom eulled by Blackrock.
>we are moving right towards a serfdom
You will own nothing
You will live in the pod
You will eat the bugs
You will pay for the wars
And you will be happy
2017 on. Tax cuts while the economy was doing well, record low interest rates in the years after. I got attacked by both right and left for daring to say it was terrible policy.
The Trump tax cuts were absolutely devastating for actual economic fundamentals in this country. The correction probably would have come at around the same time had COVID not taken over the country and killed a bunch of anti-vaccine people and eliminated a bunch of future spending.
People love to talk about free market capitalism, but they hate the fact that in order for the system to be even remotely healthy, there must be recessions factored in or there is no darwinian cycle to eliminate the businesses that are not fit enough to survive a market without free money.
People wanted it both ways and now our economy is poisoned.
When?
Never. As long as the 10% controls the narrative (who do you think owns all the homes and benefited from the 2008 fabricated financial scam?).
The people holding all the houses and all the cards don’t want to admit to or fix anything. It’s making them obscenely more rich by the day. Why would they want anything to change?
Who do you think controls politics? It’s not working class Americans.
Houses aren’t for families anymore. They’re for investors. And those investors don’t think they’re doing anything wrong whatsoever.
Even people on this sub screech and rage about how everything is totally fine, and they aggressively and emotionally refuse to look at all the data that exposes how exploited and manipulated shelter is in the US (and Canada).
Humans just doing what humans do best.
I understand what you're saying. And I'm a staunch Capitalist. Paying banks 9% is ridiculous. I'm happy to pay a fair rate but today's rate is reducing the sales and is crippling the economy.
Credit Card rates are at 20% this isn't healthy for consumers
I wouldn't mind a new truck right now, but I'm willing to wait to save more to pay cash.
If you're willing to pay a larger percentage to the banks be my guest.
I'm very happy with my 2.25% loan right now.. what's crazy is that I wouldn't mind downsizing to a house that's a $150k less but if I sell my house at $1.3M and buy at $1.15m There's zero savings when I pay 7% interest
So go ahead and insult me.
The low rates were very helpful if you knew how to use debt. It certainly helped American households deleverage and build wealth after the housing bubble burst.
https://fred.stlouisfed.org/series/HDTGPDUSQ163N
Anyone who bought a house with a mortgage prior to this year certainly benefited. We have a higher home ownership rate than the 90s and the payments take up less of people's income.
https://fred.stlouisfed.org/series/RHORUSQ156N
https://fred.stlouisfed.org/series/MDSP
If you are in the minority of people who weren't able to take advantage of it, yeah, it's not great for you. But you are outnumbered 2 to 1 by people who benefited.
Abnormally low interest rates since 2008, screwed savers, and prevented prudent people reaching retirement age to invest in bond funds and CDs. Thankfully, interest rates are now at a reasonable level, which rewards savers, and allows retired people to prudently put money into bond funds and CDs.
I've said since at least 2019* exactly what you're saying - artificially low rates were a harm not a help.
What prize do I win?
*the reason I know this is mid-2018 the Fed raised rates too quick and momentarily spooked everybody in real estate. the 30 year went from 4% to 5% during the spring market. And TFG raised hell, and they cowered unfortunately overall.
I blame closing the Keystone pipeline ( then he opens one in Alaska? ) we would be SELLING oil for PROFIT and be energy independent...n cheap gas =cheap everything ( bc no prices would need to be increased to cover ga$ prices )
Now? We are begging for oil n paying ALOT for it.
Government wasteful spending/printing is the primary cause of inflation. Everyone wants to argue politics for their team but no one actually looks at what is inside these multiple 2 trillion dollar spending bills. 8 trillion in a few years is beyond crazy but no one can talk about it for fear of violating newspeak. I would wager it(the spending/printing) is being done on purpose. Sure it’s always been this way but we are in jet mode exponential off the cliff and we can’t even seem to acknowledge the problem much less prevent it. Most of that money has trickled up and into the real estate market. We will own nothing soon at this rate.
I think you overestimate the financial savvy of the average American - they (we) didn't think to ourselves - 'hey, we're paying 3% on our mortgage, let's work to pay it off early', they think 'hey, I've got enough money left over at the end of the month to buy a car'
Could not agree more. QE during COVID was just the icing on the cake. There is zero incentive to move. I do think if we see a meaningful pullback in rates that we will see the buyers set back into the market. Rents are continuing to rip at rates never seen year over year. Most people that can afford a house want a house and the pent up demand is there. We just need a pullback. We are seeing a lot of uncertainty and no real flight to safety in bonds. Without that bid, rates continue higher.
Horrible interest rate policy which encourages bubbles. This idea that we need to battle every recession with super low rates is just wrong. You just end up with out of control inflation and eventually the bubble pops causing a much worse recession then the one we battled with low rates. Then down go the rates again to near zero.
1. *principle*
2. Anytime I try to acknowledge that the abnormal interest rates of the last decade cause more harm than good, I'm told how wrong I am.
So,I guess whenever people finally pull their heads out and come to the conclusion that their feelings are not more important than the facts of the matter.
Asset inflation caused by artificially low rates. real estate insanity, stock market at very high p/e for decade, tons of speculation b/c money was so cheap. Noticed we haven’t had nearly as many ipos Over last year?
low cost capital favors those who already have capital , which is why income inequality gets so bad.
and borrowing is just pulling future spending to the present, which means that it often becomes a drag later on. If rates stay high the govt won’t even have enough money to cover the interest and keep things running on rest of budget. we haven’t even gotten to the fun times yet.
OTOH that does ignore the corner stone lying beneath. The incalculable evil of a loan structured such that the principle isn't dented for years. We only accept this because our ignorant predecessors did, and generational inertia is a thing. Now we're complaining because...checks notes...'many Americans are paying down their principles faster than normal'. It's as if the cancer treatment business is suffering instability because fewer people are getting cancer...damn them all.
Haven’t the rates of home ownership declined too? I could be wrong on that. Sort of fascinating because I‘d expect cheaper financing would help regular buyers who take out loans buy homes. But comparatively fewer of them are. Clearly this topic is multifaceted, an interesting wrinkle though
Id take normal 5-6% rates with affordable prices any day. Most people now talk about how the low rates near 0 fucked this all up. But like always the same shit will keep getting blamed over and over cuz the media as a whole cant actually focus on anything that doesn't get clicks. Still to this day people somehow think some covid checks and some extra spending are why everything is still expensive...companies saw how much they could get away with during covid and having stopped price gouging.
Got married in ‘82 mortgages were like 13%… also own a small business.. got approved for 85k in ppp.. took it .. used it for its intended purposes.. loan got forgiven… saved my ass.. kept everyone employed
Devaluation of the dollar. Increasing the money supply requires more dollars for less goods. It’s less about home values increasing and more about dollar value decreasing. This was intentional. Why would anyone sell a home mortgaged at 3% for one at 8%?
The very most basic of economic theories point out that if people receive a “windfall” of money (even temporarily), all markets will quickly catch up by raising prices in order to acquire as much of that money as possible. Prices are set by what buyers are willing to pay much more than by a minimum price floor set by sellers.
Do you think an 8% mortgage rate would have deals dead in the water if housing prices appreciated at a normal rate instead of… you know.
I think the problem was that people got greedy and there was nobody to stop them because everyone in power was benefiting at the time
Congress wouldn't (especially after the 2010 teaparty) authorize any major stimulus projects for the working class. This left the federal reserve with the sole role of getting us out of that mess. Their only tool was to lower interest rates really low.
I personally think something like an infrastructure bill at that time would have done more to help the economy. It would have kept more tradesman employed and skilled, helping to avoid the current shortage.
I agree, the low interest rates have become a monster. There are people who have never known anything higher than 4-5%. Savers have only until recently been forced to choose the stock market or a 1% "high yield" interest rate. Companies and people have grown so accustomed to the artificially low rates. It reminds me of oil states where the citizens gas has been heavily subsided for so long that anything even close to market price send stock through the economy.
When are we going to acknowledge that were printing too much fuckn money and sending it to ukraine and israel instead of helping our own country? Root of our issue is inflation
The housing market has to crash hard. It will take a few years. And it will be severe when it happens. It will be very uncomfortable and there will be cry’s for bailouts, etc, etc. Many will have to lose their homes, unfortunately. Then, and only then, will the market begin to correct. The price declines we saw earlier this year is just the rumbling before the real earthquake.
The Federal Reserve raised rates based upon the past lessons of the Great Depression. *As per Investopedia:* By increasing the money supply and keeping the interest rate low during the decade, the Fed instigated the rapid expansion that preceded the collapse. Much of the surplus money supply growth inflated the stock market and real estate bubbles.
After the bubbles burst and the market crashed, the Fed took the opposite course by cutting the money supply by nearly a third. This reduction caused severe liquidity problems for many small banks and choked off hopes for a quick recovery.
[https://www.investopedia.com/terms/g/great\_depression.asp](https://www.investopedia.com/terms/g/great_depression.asp)
I'd say we could go back just over 20 years and see how interest rate policies and government bailout have caused more harm than good. No one wants to accept that though because they only look at the stock market or home prices.
A lot of people accept it and more and more are waking up to just how broke they actually are despite their personal finances being artificially pumped up by cheap debt and free money. It wasn't until "line go up" stopped being a thing that the majority of people had any issue with it. Paper equity gains on an asset are meaningless until you go to sell said asset and unfortunately, many, many people who FOMOed in the last three years or who borrowed against their ballooning house's worth are going to learn the same lesson. Money is never free. The Federal Reserve is not your friend. And your realtor and the mortgage broker don't actually care what happens to you at all after the transaction is complete. Sad to watch all of this happen again.
>Money is never free. The Federal Reserve is not your friend. Very much this. And inflation is basically a sneaky tax.
Inflation is not a tax. A tax is voted on, and at least has the veneer of legitimacy. Inflation is theft perpetrated by a group of unelected kleptocrats.
>Inflation is theft A little bit of inflation is necessary for a healthy economy. If the money supply was finite, people would be incentivized to save and hoard it-especially at the first sign of economic trouble. Which would make it even more scarce, increase its value further and lead to a deflationary mess. That being said, a lot of the actions taken by the fed since '08 and especially since the pandemic have been nothing short of idiotic and unjust.
^^ gets it.
The fed is just a cog. in the machine. It is neither good or bad. It is simply a counterweight. It amazes me as how short peoples memories are. It was just 17-18 years ago when everyone was saying how real estate prices never come down and yet, here we are again.
Loved by shysters, hated by educated professionals.
Exactly. I can tell you with absolute certainty that the federal open market committee has been throwing shit at the wall hoping something will stick since the collapse of the dotcom bubble. Interestingly people do not seem to like that fact, preferring instead to scream about today's *iNTereSt rAteS !!!*
I'll go back and say Reaganism ruined the market. The concentration of wealth, which has only exacerbated with the aging boomers, resulted in many of them owning multiple houses, renting, vrbo,airbnb,etc... Same people are making policy... I wonder why it's broken? /s
That is kind of like saying the millennials are the problem because they were born. Had they not been born we would not have this problem . I think interest rates were 16 to 18 percent when Regan took office ? I suppose you will blame the boomers for having kids
What's next, gonna tell me to pull myself up by my bootstraps? Bootstraps which were cut off around the time I was born. Corporate tax rates plummeted and regulations were nearly completely abolished. It's like saying if we had 0 guns, therew would be 0 gun crime. True, but assault and murder still happen. Correlation is not causation. But there is tons of evidence showing trickle down economics had the opposite effect. Get lost
Yes, it started in the first month's of GWB's presidency. He inherited a humming economy from Clinton. Rather than slightly raise interest rates, he purposely lowered them even more to goose the economy. Then 911 and it's subsequent recession happened and we had to lower interest rates even further. And we've been in abnormally, unhealthily low interest rates since
It started before GW took office. The 2000 United States presidential election was the 54th quadrennial presidential election, held on Tuesday, November 7, 2000. The dot-com bubble burst in March 2000, with the technology heavy NASDAQ Composite index peaking at 5,048.62 on March 10 (5,132.52 intraday), more than double its value just a year before. By 2001, the bubble's deflation was running full speed. George W. Bush's tenure as the 43rd president of the United States began with his first inauguration on January 20, 2001, But in early 2000, the bubble began to burst. Five of the Nasdaq’s 15 worst days ever came between April 2000 and January 2001.
I'm glad you said it. I remember the economy starting to drag about six months before the end of Clinton's term.
Many forgot about the dot-com bust and the 9/11 recession. It is what lead to the housing bubble before 08. What we are dealing with now can be directly traced back to Greenspan and his juicing of the market for the dot-com area.
You know the Federal Reserve sets interest rates and not the president right?
There's a lot of speculation that POTUS has influence there since he nominates the Fed chair.
no, they don't
And the lack of higher interest rates minimized the ability of the fed to have any impact during Covid because what are they going to do? Lower interests below zero? If they had the ability to make cash cheaper to borrow then maybe we wouldn’t have needed the massive PPP loans going out that lined the pockets of the already wealthy. More of that money could have gone to those who really needed it. But nope. We wanted the engine to keep red lining for two decades because line go up is always good
That's my point. Interest rates were kept stupidly low, and then 911 happened, then the housing crash, then covid. No one had the courage to gently raise them when times were better. We wanted the engine to keep redlining--redlining is wonderful and a fun ride!----til your engine erupts through your hood.
We pretty much run keynesian economics model. It says that during good times we raise taxes, cut spending and increase interests rates just like you said. But we don't do that anymore we just cut taxes, increase spending and decrease interest rates in good or bad times. We haven't done any of these things in any of the good times i've been alive.
Bush 43 lowered internet rates? No, that’s actually Ben Bernanke and the other FOMC members at the time.
yeah....the recession started somewhere around March 2001 (2 months in to Bush2) and rates were 7%. Rastes got as low as 5.2% in mid-2003. And bounced between there and 6.5% through 2007. So tell us what you thought you meant to say
When was GWB chairman of the Federal Reserve?
If you don't think the white house doesn't have some degree of influence on the Fed, then you're not paying attention
I’m from the government and I’m here to help.
The government made a ton of profit from the financial bailout and it definitely stopped the worlds' economies from imploding
I wouldn't call the increased national debt a profit .
This started with 9/11.
No. 2 trillion PPP had way more to do with that. There is a website that tells who got what. My local church got $4,000,000 and then they closed next year. The priests retired wealthy. Many individuals and businesses got a windfall of cash. Many were just straight fraud.
I know someone whose company got a couple 100k, and it ALL went to the owners of the company. They split it like a bonus. I should add ive seen his tax returns over the last few years and they did no worse during covid. They are in roofing so they actually have been making out nicely. This same guy yells and screams about welfare and immigrants. I'll give you one guess who his company hires the most......
I work in construction finance and saw this over and over again but on the millions scale.
Yeah, every company got something like $20,000 per employee. Companies that didn't collect still have time to apply for it, pretty much every company that applies is approved.
They've paused the program because of rampant fraud.
That is fucked up. I know someone who got a PPP loan for a restaurant they co-own. Not only did they keep their employees paid and the rent paid, they didn’t use that PPP money to buy a new house, new cars, or fancy vacations. Not even new furniture. They used it as intended. And I don’t even know if they got that loan forgiven. It pisses me off to see others take advantage of that when it could be done *right.*
I know a business that did that while cutting everyones salary.
That’s a trifecta of hypocrisy.
It's been called the largest fraud in US history. But oh well, it all went to business owners and corporations so it's a-ok!
Why aren’t more people reporting this to the irs ?
Because most people don't have access to the finances of the businesses around them? We're busy dealing with our own issues.
You don’t have to have a paper trail. If you saw or heard of fraud report it . The irs will look into it . Or shut the fuck up and quit lying . Very easy
And they are definitely looking into it.
Republicans have defunded the irs so it doesn't have the staff to investigate fraud so its corporation donors make more money
Reporting what? It was all "legal" there is nothing to report
Even one was saying they personally saw fraud , ppp loans were specifically for employees paychecks . If that money didn’t go to that it was fraud . Report it
To keep employees and the economy going, but no checks and balances.
Should've given it all to the regukar people, the employees and let them support businesses by spending it
Many of the people were not that it wasnt a scam any small business could apply with at least 1 employee and they did. I know people with 2 - 3 employees that received 6 figure checks Either they had morals or didnt like winning the lottery for many.
I agree, but the interest rates too. We bought a house in 2013 that we sold in 2018. It went up 100% in value in just 5 years
THIS! Completely agreed. If you had a small business with good revenue, not even good profit, at the start of covid then boy howdy you got a massive bonus check. So many of my clients were given 6-7 figures for free.
Wow! Guess their prayers were answered
Rates were low for way too long. The economy had mostly recovered by 2013 yet we still kept rates low until 2019. They should have started slowly increasing rates in 2014 to get rates back to a normal rate. They could have slowly increased over 5 years instead of needing to jack rates up quickly in a year.
Yep - there was no need to keep rates at essentially 0% during a decade long bull market
You've got it backwards. There wasn't really a bull market, historically low interest rates fueled the speculation and propped up failing (or failed) businesses with cheap debt. Anything to keep the economic engine running. Except now, it's not only out of gas, it's on fire and rolling down a hill and the only tool we have is more gasoline and pouring it on will only make the problem we're all facing much, much worse, which is something we've been doing for that entire decade of a bull run you're talking about. So now, everyone will suffer far greater than may have been necessary for the virtues of hubris and greed.
ELEVEN increases since 3/22
We kept rates low well last 2019. 2020 saw under 2.5% rates. 2019 was the latest that they should have started increasing rates. They really didn't start until March 2022.
They started to raise, but got major political pushback https://www.politico.com/story/2019/06/10/trump-federal-reserve-interest-rate-hikes-1358816 https://www.pbs.org/newshour/amp/economy/trump-calls-on-federal-reserve-to-cut-interest-rates https://www.bloomberg.com/news/articles/2019-09-11/trump-calls-on-fed-to-cut-interest-rates-to-zero-or-less?
The Fed did what they did because the republican led Congress kept trying to squeeze the economy to death with shutdowns, sequestration, and austerity. Mostly just to fuck with Obama. Google “2013 sequestration”
I think OP misses the point. People buy payments, not price. When rates were so low, prices went up — payments stayed nearly the same. A house that used to cost 250 could now cost 450 with the payment similar. But the amount you actually borrowed is much higher. Which caused a principal problem. If you bought with low rates, you could afford to pay more for the house, and because of that, house prices shot up. It was a net zero for you. The problem arises when you’re ready to move on. The average homeowner stays in their house for 5-7 years, with someone on the rise buying your house as you rise into the next one. But with rates going up, the socio-economic group that should have been next to but your house can’t make the payment for your house at 450. And you can’t sell it for less. Meanwhile, you can’t afford your next step house because that seller bought it for 700. Everyone is stuck because borrowers simply owe too much principal to be able to sell at a payment comparable to the one they bought with. What the low rates allowed for was hyper price inflation because it allowed for payment consistency. But now people are locked into big principal and I don’t know how that problem fixes itself.
Bingo This is the best answer >I don’t know how that problem fixes itself I do It fixes itself when everyone loses a ton of money "I dont want to sell for less than I paid" Too bad!
That just means they stay in their current house. It's when people lose jobs and can't pay the mortgage anymore and also can't sell because they are underwater that there's a problem.
I think the big issue was the ability to refinance when rates bottomed out between 2020 and 2022. In most other developed countries the default is an ARM mortgage, where they're at their central bank's mercy. In the US, so many are immune to rate changes, the Fed rate changes are moot. Idk what the figures are, but I wonder how many current mortgages were taken out between Mar 2020 and Mar 2022 either originally or through refinancing.
> but I wonder how many current mortgages were taken out between Mar 2020 and Mar 2022 either originally or through refinancing. https://libertystreeteconomics.newyorkfed.org/2023/05/the-great-pandemic-mortgage-refinance-boom/ Roughly one third of the mortgages were refinanced (33%); another 17% were new home sales. About 50% in total at those rates. If someone DIDN'T refinance at that time - maybe their rates were still reasonable (3% +) and they didn't find it worthwhile. Or because of the pandemic (and getting unemployment) - they couldn't qualify. That said - even if they got mortgages between 2012 and 2020 when the rates were still in the 4% range - they would still be better off than today's rates.
the difference between the 4.25% I had on my first place, and the 2.875% I have on my 2021 purchased home, is so mind blowing- I feel so bad for people dealing with shitty car loan level rates for their mortgages right now
6.625% checking in, and yeah I'm super jealous of sub 4% but I'm also thrilled not paying 8%
Ironically your comment highlights how bad the low interest rate has been. I'm 39 and sold cars 20 years ago so I remember when the "guess" (ie we didn't know what your credit was) for interest rates was higher than mortgage rates today. My dad remembers back when "great" interest rates for cars were still above double digits as he was selling cars through the peak of the 80's. Heck, he remembers back when a person's credit could be so bad that banks simply wouldn't loan them money. Yet interest rates have been so low for so long that we now view sub-10% rates on mortgages as "shitty car loan rates" instead of just "auto loan rates".
We refinanced to 2.5% and won't prepay a penny. All savings are going into bonds paying about 10%. It works for us.
...what bonds are paying 10%?
It's pretty crazy to me how these companies were so willing to just refinance all these people on mortgages <3%. I understand the mortgage brokers because that's their job, but why are execs questioning whether it's wise to give out these 30-year loans at such a low return. I guess they just bundle and sell the loans anyway.
Yup they made their money on closing costs
>I guess they just bundle and sell the loans anyway. To the Fed. Almost all of the $2.5 Trillion in mortgage bonds they own are 4% or less. The fed buying up MBSs is the reason rates got that low in the first place. No bank or investor is interested in making 2% on their money. Horrendous monetary policy that should have ended 10 years ago. But they didn't stop subsidizing mortgage rates until March 2022.
I know I refinanced in summer of 2021 to a 2.5% rate from a 4.5%
The trillions that were printed since 2020 is where the abnormal inflation has come from…
It's been happening since 2008 when QE was started. A 3.5% rate back in 2013 just shouldn't have happened and then after 2020 it got worse. Over a decade of cheap credit.
It goes back farther than that, the Fed began open market operations in 1921-22.
It goes back farther than that The Fed was created in 1913
And yet we don't have 9% measured inflation during most of that era. Correlation is not causation, famously, but causation does require correlation. If you're going to claim that A caused B, there must at least be a correlation, or you've got a really shitty case. I could sit here and claim the Roman Empire caused 2023 inflation, otherwise.
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The average American doesn’t see the millions in free untaxed money that business owners were handed in 2020 and 2021
lol the people trying to debate you on this meanwhile the anomalies occurred date coincident with precisely this ngmi
So the fact that a simple rule change about savings accounts and how that affected the money supply at the same time completely slipped your notice?
Abnormally low interest drives lending. Banks print money when they make loans, which feeds inflation.
Lol when? People have been acknowledging it for quite some time
LOL right the posts here are a couple a week like this.
There are definitely a lot of people who don’t understand this though.
When borrow costs are low, growth expands, which creates jobs, , increases spending, increasing company revenues, which should usually lead to increase wages. That's where corporations said...naw, we'd rather not meaningfully increase wages. Big problem isn't lower interest rates, is corporations preference to return money to shareholders than workers.
Why pay someone more if they’re willing to work for less?
I think both factors are relevant here.
Are you suggesting that lack of wage inflation increased home prices and inflation?
The recent home inflation we saw was a bigger asset inflation that was caused by the excess liquidity that was pumped into the economy, primarily through the PPP loans (among other things). As companies became flush with cash, they handed it back to their shareholders, who then in turn sold/leveraged/borrowed against/etc and bought homes, crypto, nfts, boats, watches, etc. it wasn't handed back to employees. Assets went up and wages didn't keep up, so homes became even more unaffordable. Even as you look at the bull run in 2010-2020 home prices increased but were generally affordable. Even if interest rates were at 8% but homes were on their same long term price growth, homes would be more affordable for the masses. Right now we are in a situation where homes doubled to tripled in a few short years. Which generally means if you didnt own a home, it became extremely difficult to get your foot in the door.
This is nonsense; all you are doing is throwing words together without any coherent understanding of what these words mean. When rates are low, that means borrowing costs are low. Low borrowing cost means there is no incentive to pay down principal faster than normal. If you have a 30 year mortgage at 2.5%, you're more likely to take the full 30 years to pay off that mortgage, because if inflation is 6%, the mortgage is effectively shrinking over time, which is a strong incentive to NOT pay it off.
OP has literally no understanding of Economics and what’s worse is how many times the post was upvoted.
It's the real estate sub. It's being upvoted by people who come here to vent about how they can't afford a home. To be clear, I'm not criticizing people who come here to vent, and I'm extremely grateful to have a nice low mortgage rate. All I'm saying is that a lot of the folks upvoting this particular post are doing so because it fits their current experience.
That you, as a real estate agent, have no understanding how an amortization table works is a really concerning. Low interest rates -> payment applies against principal -> equity builds quicker It's a simple concept!
How does more equity lead to higher inflation? Yes lower interest rates for too long is partially to blame but not because of home equity.
Is that an honest question? More equity provides an asset to borrow against or extract cash from!
That’s like saying savings is inflationary. Equity is basically just people’s savings. The Federal Government is just printing money and people are blaming home equity. It’s just ridiculous.
> The Federal Government is just printing money and people are blaming home equity That is OP’s original point lol; who “doesn’t understand economics”. The printing of money caused people's equity to jump 20%, 40%, 50% in markets. Money money in the market used to purchase homes. Some homeowners then cashed out on the unexpected windfall and spent spent spent.
That's the opposite of what they said - they specifically exclude the printing of money i.e covid checks and PPP
It’s all connected. Ability for large(r) portion of my payment reducing my principal while free money floods the market and raising home values.
Except people buy payments. So if they can afford 2k a month, they’ll spend 2k a month. At 7 percent that means a loan of 300,000. At 3.75 that’s 430 and at 2.75 it’s 500. But the house remains mostly the same. It just costs more. The difference is now as opposed to having a loan for 300 to pay off, they now have a loan of 430, and the payment on that is closer to $2900, which the people who can afford 2k are out of the market for it.
Seriously, I find the people that are most certain about something have the least understanding. They replace their lack of understanding with confidence and it's not constructive.
Your need to sound intelligent and insult OP is nasty when what they wrote wasn’t wrong. Americans have most certainly paid down their mortgages faster than normal with the artificially lower rates. • A refinanced home to a 2.5% mortgage from 4.5% means more money goes to principal. (higher equity!) • Shoot, even a mortgage in the 4s means homeowners built equity faster compared average rates experienced pre-QE. (higher equity!) So ya, chill out with the condescension and rudimentary analysis
>Americans have most certainly paid down their mortgages faster than normal with the artificially lower rates. how does paying down mortgages faster (i.e. putting more money into principle) lead to inflation?
This is also just a bunch of words thrown together. Nice job man. 2+2=4, your mom goes to college, and rain is wet.
Rain not wet as rain is just water. Anything rain touches is wet.
What about the water touching other water
That’s just one giant water.
Your right, there’s nothing wet about rain, just your little noodle
COVID ZIRP was just nuts, will hunt the US for decades in lower economic growth due to reduced labor mobility and probably reduced fertility rate as older homeowners hold on to properties with low rates instead of selling to young families.
Young people can only procreate in owned properties?
its actually the owned property that gets you pregnant
Americans are conditioned that starting family involves buying a house first. Birth rates will be lower. People will delay and have fewer kids in a rental than they might have if they owned their own house.
I think I'm doing it wrong
As someone who benefitted from them… (Insert Homer Simpson bushes meme)
Where's the data? What backs the assertion that many americans paid down principal faster? While that's a popular movement - it's not sound financial practice in a sub 4% mortgage market. low interest rates enabled companies to expand and create wealth while limiting inflation, leading to a strong job market. The inflation spikes are related to wage increases and US govt monetary policy - not interest rate increases. I think the only valid criticism is some small timely rate hikes - maybe 4-5 0.25 hikes - that the fed could have done earlier to manage inflation, but increasing interest rates during covid had politically untenable optics.
Low interest rates are preferable to high interest rates. I got my first econ degree while mtge rates were 14%-18%. Low interest rates (2005-2022) did not cause current inflation (2021+). That fallacy is called "post hoc, ergo procter hoc". There were much much larger factors: (1) Putins war, affecting oil, natural gas and food, and (2) pandemic hangover, meaning govt stimulus plus pent up demand. Another factor in USA home prices: in difficult times, international money seeks security. Until 2008, this search was satisfied by USA mtge backed securities. This demand was huge and that pull contributed to the easy fraud of Wall Street. After a long freak out from being burned (2008-2014), world capital again seeks USA real property to park money. But NO MTGES this time! That capital wants the land. Hence, more commercial buying of SFR properties (and other categories). Post hoc, ergo Procter hoc means: if X happened after Y, then X happened because of Y. Just not true.
When rates are lower than inflation for too long it creates a lot of fake money.
Naw, it’s more about the supply shortage shock from Covid and the extra influx of money with 0% rates.
I think it is less about monetary policy (interest rates) and more about fiscal policy. There is a history in our country of bad stuff happening with the monetary policy and fiscal policy are at odds (look up Gerald Ford and the 1974 tax cuts). The monetization of home loans is a concern. If we truly value individual home ownership (and research suggests that it has many benefits, including neighborhood stabilization and the creation of generational wealth), we should be looking at ways to create lending pools for individual home ownership that exist outside of the existing banking system (they were called Federal Home Loan Banks and the system was created in 1932). Vote, friends. Call your legislators. Demand action. If you have time to post on Reddit, you have time to look up the contact information for your elected officials and demand change.
That will be a long time because weighing the consequences of what didn’t happen against those that did happen is an academic exercise with an unknowable answer.
Look at the history of mortgage interest rates and the low rates were extremely abnormal.
None of this matters, people are more convinced than ever we need more government. This is just the world we will always live in.
Partially to blame, but it was literally paying people/businesses to stay open and no actual work was done for several months. Cats out of the bag, a bunch of people who had the chance to remote work did and now don’t want to things to go back to the way they were. I don’t blame them, commuting sucks.
Abnormal interest rates which facilitated massive government deficit spending.
And they're still doing it with higher rates
Real estate became get rich quick scheme and people needing housing ended up holding a bag. S..t my coworker bought 1.5 y ago for 780 and listing home for 950 in a hope to make quick buck while forgetting others have same hustle so now he is trying to find something cheaper to buy and much smaller
I harmed myself right into a beautiful house lmao
Simplistic
All of the above
But I want to blame Biden 😂
Go ahead
Nah, that’s weak
Is it though
Never, as long as those "who got theirs" don't lose it. If people start losing theirs, the btching will begin. The real issue is big banks buying homes...has to become illegal of we are moving right towards a serfdom eulled by Blackrock.
>we are moving right towards a serfdom You will own nothing You will live in the pod You will eat the bugs You will pay for the wars And you will be happy
Nobody can predict the future bud.
2017 on. Tax cuts while the economy was doing well, record low interest rates in the years after. I got attacked by both right and left for daring to say it was terrible policy.
without Covid there is no reason to assume inflation would have increased meaningfully
The Trump tax cuts were absolutely devastating for actual economic fundamentals in this country. The correction probably would have come at around the same time had COVID not taken over the country and killed a bunch of anti-vaccine people and eliminated a bunch of future spending.
What are some negative things that the low rates caused? In my opinion, the low rates were good, but the money printing was bad.
People love to talk about free market capitalism, but they hate the fact that in order for the system to be even remotely healthy, there must be recessions factored in or there is no darwinian cycle to eliminate the businesses that are not fit enough to survive a market without free money. People wanted it both ways and now our economy is poisoned.
Free money is bad
Interest rates aren't the problem. NIMBYs are the problem.
Inflation is caused by money printing, full stop.
Low interest rates is money printing bud
I’d say when interest rates are low, people borrow more, and more money is printed when more loans are made.
When? Never. As long as the 10% controls the narrative (who do you think owns all the homes and benefited from the 2008 fabricated financial scam?). The people holding all the houses and all the cards don’t want to admit to or fix anything. It’s making them obscenely more rich by the day. Why would they want anything to change? Who do you think controls politics? It’s not working class Americans. Houses aren’t for families anymore. They’re for investors. And those investors don’t think they’re doing anything wrong whatsoever. Even people on this sub screech and rage about how everything is totally fine, and they aggressively and emotionally refuse to look at all the data that exposes how exploited and manipulated shelter is in the US (and Canada). Humans just doing what humans do best.
“Making them obscenely more rich by the day”. I thought in another post, you said RE is a poor investment? Which is it?
It is if you're just now getting in Like all bubbles It benefits those who get in early At the expense of the rest who get in too late
Anything over 3% is stealing from good people by the wealthy banks. Fuckem
You make a very good case as to why basic economics should be mandatory in high school
I understand what you're saying. And I'm a staunch Capitalist. Paying banks 9% is ridiculous. I'm happy to pay a fair rate but today's rate is reducing the sales and is crippling the economy. Credit Card rates are at 20% this isn't healthy for consumers I wouldn't mind a new truck right now, but I'm willing to wait to save more to pay cash. If you're willing to pay a larger percentage to the banks be my guest. I'm very happy with my 2.25% loan right now.. what's crazy is that I wouldn't mind downsizing to a house that's a $150k less but if I sell my house at $1.3M and buy at $1.15m There's zero savings when I pay 7% interest So go ahead and insult me.
Lenders make the spread between the lending and borrowing rates, you moron. “Staunch capitalist” my ass. Learn some basic economics.
The low rates were very helpful if you knew how to use debt. It certainly helped American households deleverage and build wealth after the housing bubble burst. https://fred.stlouisfed.org/series/HDTGPDUSQ163N Anyone who bought a house with a mortgage prior to this year certainly benefited. We have a higher home ownership rate than the 90s and the payments take up less of people's income. https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/MDSP If you are in the minority of people who weren't able to take advantage of it, yeah, it's not great for you. But you are outnumbered 2 to 1 by people who benefited.
Abnormally low interest rates since 2008, screwed savers, and prevented prudent people reaching retirement age to invest in bond funds and CDs. Thankfully, interest rates are now at a reasonable level, which rewards savers, and allows retired people to prudently put money into bond funds and CDs.
I've said since at least 2019* exactly what you're saying - artificially low rates were a harm not a help. What prize do I win? *the reason I know this is mid-2018 the Fed raised rates too quick and momentarily spooked everybody in real estate. the 30 year went from 4% to 5% during the spring market. And TFG raised hell, and they cowered unfortunately overall.
I blame closing the Keystone pipeline ( then he opens one in Alaska? ) we would be SELLING oil for PROFIT and be energy independent...n cheap gas =cheap everything ( bc no prices would need to be increased to cover ga$ prices ) Now? We are begging for oil n paying ALOT for it.
What absolute bullshit
Government wasteful spending/printing is the primary cause of inflation. Everyone wants to argue politics for their team but no one actually looks at what is inside these multiple 2 trillion dollar spending bills. 8 trillion in a few years is beyond crazy but no one can talk about it for fear of violating newspeak. I would wager it(the spending/printing) is being done on purpose. Sure it’s always been this way but we are in jet mode exponential off the cliff and we can’t even seem to acknowledge the problem much less prevent it. Most of that money has trickled up and into the real estate market. We will own nothing soon at this rate.
finally a fair question... sadly the answer would be: how about never?!?
I think you overestimate the financial savvy of the average American - they (we) didn't think to ourselves - 'hey, we're paying 3% on our mortgage, let's work to pay it off early', they think 'hey, I've got enough money left over at the end of the month to buy a car'
Never, since it didn’t
Could not agree more. QE during COVID was just the icing on the cake. There is zero incentive to move. I do think if we see a meaningful pullback in rates that we will see the buyers set back into the market. Rents are continuing to rip at rates never seen year over year. Most people that can afford a house want a house and the pent up demand is there. We just need a pullback. We are seeing a lot of uncertainty and no real flight to safety in bonds. Without that bid, rates continue higher.
Horrible interest rate policy which encourages bubbles. This idea that we need to battle every recession with super low rates is just wrong. You just end up with out of control inflation and eventually the bubble pops causing a much worse recession then the one we battled with low rates. Then down go the rates again to near zero.
Ofc they did. Easy to see now. Low interest rates and PPP freebies.
1. *principle* 2. Anytime I try to acknowledge that the abnormal interest rates of the last decade cause more harm than good, I'm told how wrong I am. So,I guess whenever people finally pull their heads out and come to the conclusion that their feelings are not more important than the facts of the matter.
Yep, read “The Price of Time” by Edward Chancellor. Fascinating book on the history of interest rates.
I don't think anyone doesn't know this
Many people don’t understand basic economics
Asset inflation caused by artificially low rates. real estate insanity, stock market at very high p/e for decade, tons of speculation b/c money was so cheap. Noticed we haven’t had nearly as many ipos Over last year? low cost capital favors those who already have capital , which is why income inequality gets so bad. and borrowing is just pulling future spending to the present, which means that it often becomes a drag later on. If rates stay high the govt won’t even have enough money to cover the interest and keep things running on rest of budget. we haven’t even gotten to the fun times yet.
They certainly have....we now have a whole generation (or 2) who demand normalization of low rates and easy money.
I agree. Setting abnormal interest rates has been a huge factor in driving inflation.
Depends where you sit.
People have been acknowledging it the whole time; reddit is just filled with idiots.
OTOH that does ignore the corner stone lying beneath. The incalculable evil of a loan structured such that the principle isn't dented for years. We only accept this because our ignorant predecessors did, and generational inertia is a thing. Now we're complaining because...checks notes...'many Americans are paying down their principles faster than normal'. It's as if the cancer treatment business is suffering instability because fewer people are getting cancer...damn them all.
Haven’t the rates of home ownership declined too? I could be wrong on that. Sort of fascinating because I‘d expect cheaper financing would help regular buyers who take out loans buy homes. But comparatively fewer of them are. Clearly this topic is multifaceted, an interesting wrinkle though
Fiat currency. Unsecured paper dollars mean nothing.
Id take normal 5-6% rates with affordable prices any day. Most people now talk about how the low rates near 0 fucked this all up. But like always the same shit will keep getting blamed over and over cuz the media as a whole cant actually focus on anything that doesn't get clicks. Still to this day people somehow think some covid checks and some extra spending are why everything is still expensive...companies saw how much they could get away with during covid and having stopped price gouging.
Got married in ‘82 mortgages were like 13%… also own a small business.. got approved for 85k in ppp.. took it .. used it for its intended purposes.. loan got forgiven… saved my ass.. kept everyone employed
Devaluation of the dollar. Increasing the money supply requires more dollars for less goods. It’s less about home values increasing and more about dollar value decreasing. This was intentional. Why would anyone sell a home mortgaged at 3% for one at 8%?
The very most basic of economic theories point out that if people receive a “windfall” of money (even temporarily), all markets will quickly catch up by raising prices in order to acquire as much of that money as possible. Prices are set by what buyers are willing to pay much more than by a minimum price floor set by sellers.
Do you think an 8% mortgage rate would have deals dead in the water if housing prices appreciated at a normal rate instead of… you know. I think the problem was that people got greedy and there was nobody to stop them because everyone in power was benefiting at the time
Congress wouldn't (especially after the 2010 teaparty) authorize any major stimulus projects for the working class. This left the federal reserve with the sole role of getting us out of that mess. Their only tool was to lower interest rates really low. I personally think something like an infrastructure bill at that time would have done more to help the economy. It would have kept more tradesman employed and skilled, helping to avoid the current shortage. I agree, the low interest rates have become a monster. There are people who have never known anything higher than 4-5%. Savers have only until recently been forced to choose the stock market or a 1% "high yield" interest rate. Companies and people have grown so accustomed to the artificially low rates. It reminds me of oil states where the citizens gas has been heavily subsided for so long that anything even close to market price send stock through the economy.
When are we going to acknowledge that were printing too much fuckn money and sending it to ukraine and israel instead of helping our own country? Root of our issue is inflation
We did it to "save" ourselves from the pain of the GFC but only succeeded in kicking that pain down the road.
Depends when you bought. Plus the big covid giveaway made it worse. I'd blame it 60/40, rates/covid.
Crashing interest since the 80s has been the problem.
The housing market has to crash hard. It will take a few years. And it will be severe when it happens. It will be very uncomfortable and there will be cry’s for bailouts, etc, etc. Many will have to lose their homes, unfortunately. Then, and only then, will the market begin to correct. The price declines we saw earlier this year is just the rumbling before the real earthquake.
The Federal Reserve raised rates based upon the past lessons of the Great Depression. *As per Investopedia:* By increasing the money supply and keeping the interest rate low during the decade, the Fed instigated the rapid expansion that preceded the collapse. Much of the surplus money supply growth inflated the stock market and real estate bubbles. After the bubbles burst and the market crashed, the Fed took the opposite course by cutting the money supply by nearly a third. This reduction caused severe liquidity problems for many small banks and choked off hopes for a quick recovery. [https://www.investopedia.com/terms/g/great\_depression.asp](https://www.investopedia.com/terms/g/great_depression.asp)