Quote:
Originally Posted by spooled240
Your first comment is contradictory lol. The feds wont raise interest rates if they knew it would be detrimental to the economy, but they have and will most likely continue to increase the rates. While low interest rates can and has kept the economy sonewhat above water, there are long term repercussions and the feds know this. And as you probably already know, typically when interest rates increase house prices will decrease and vice-versa. Thats one of the big reasons why the prices increased so rapidly back in the mid-2000s.
There were some comments earlier in this thread that debated whether it was better to have a high price and a low interest rate or a low price and a high interest rate. Id rather have the latter..you can always refinance you interest rate lower later on if the market allows and your property taxes will be lower..lower for life. You cant enjoy any of those perks with a high price and low interest rate.
Whether or not prices will decrease is all speculation at this point and this is all my speculation, but Id say they have to drop eventually. Not like 2008, but enough to keep things going..because people will not be able to afford anything with the higher interest and mortgage payments. Some areas will probably not be hit as hard l, like CA in which case I will probably get the eff out of here.
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1) A significant part of the stimulus package of 08, which is allowing us the flourishing economy we currently enjoy almost a decade since the stock market collapse, is benchmark rate (which was zero up until 2015). Again I ask, if the feds knew it was detrimental, why would they increase rates?? The feds have a fair amount of confidence the markets will not be needing a helping hand and are slowly pulling back. It is a fine line they walk as although we are mostly out of the recession and job growth has remained steady, inflation is still fairly low. In addition, although feds have raised the rate to 1.25%, the rates still remain historically low, so I would highly suggest one buy a house now. Interest rates will only go up from here.
I recommend a fantastic article in the NYTimes which discusses this very topic. It does a proper job breaking down why the feds raised interest rates in the past several years. its a good concise read
Why the Feds raised Rates
2) House prices have never dropped (barring the financial collapse of 2008). They have stabilized but they will never drop as home prices themselves are one of the many bi products of inflation. So if you are banking on housing prices dropping or the stock market crashing being a few reasons preventing you from buying a home, you will never own a home at any rate......The banks themselves just completed a financial collapse faux scenario to replicate 08, and they all mostly did well and weathered the storm.
In addition, housing prices increased in the early 2000s due to simply supply and demand. Demand was driven by an individual (for example) making minimum wage buying several properties with sub prime loans that a ballooned a few years later. That, in addition to unscrupulous practices by the banks (wrapping super high risk loans in a low risk package) and the limited regulation on the market is essentially what drove house prices up and what eventually cause the collapse.
3)Speculation. When talking large sums of money, speculation is not something I would delve into. If I am about to drop $30K of my hard earned money for a down payment, I better be sure I know the risks and have done the math on either end