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Me_irl (lemmy.today)
submitted 5 months ago by to c/me_irl@lemmy.world
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[–] -2 points 5 months ago (35 children)

No because now people can borrow more to buy a house/apartment, which drives prices up.

Imagine if it wasn't 3 or 12% but 50%. You'd have to almost pay in cash, do you think an apartment would cost 400.000€? Some rare one yes but the most no.

Housing is a closed marker, everyone needs housing.

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  • [–] 6 points 5 months ago* (last edited 5 months ago) (14 children)

    This isn't true at all. They don't suddenly have more money to burn, and in fact, in the US, the amount you can borrow is based off of credit score, not the going interest rate.

    I still don't really understand what you're trying to say to be honest. You owe the bank less at lower interest rates. Higher interest rates cause you to owe the bank more. You do not have to buy outside of your means if the interest rates are low, and in fact, the financially responsible thing to do is to buy well within your means while they're low and lock in lower interest for the term of the loan.

    I think what you're trying to say is that when interest rates are low it becomes a seller's market. While true, this is not permanent and you will save money in the long run if you buy with lower rates. I think you're stuck on the short term and not thinking of the long term.

    For example, rentals in my area have surpassed my mortgage payment by a good amount. If I didn't buy when rates were low, this: 1, may have not been the case due to higher monthly payments, and 2, I might have gotten trapped in the rental cycle and never been able to own a home, ending up paying more than what I would have if I purchased a home while rates were low.

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  • [–] -2 points 5 months ago (13 children)

    I'm neither talking about sellers markets or buy vs rent.

    I'll put it as short as I can: if people can borrow more, then prices will go up, because everyone needs a home, and there is a finite number of homes. You are basically fighting with everyone else who want to buy a home when you want to buy.

    So if everyone can borrow more (low rates) then that doesn't give you a better house, because everyone can now bid higher too.

    And the reverse when it's expensive to borrow of course.

    You are talking about day to day economics, and yes I am sure you made a good choice stopping renting (economically).

    But you seem to think, that in a market with very expensive loans, it's worse somehow.

    If it's very expensive to borrow, the 450k house suddenly has no buyers and has to drop the price. Over time it becomes a 300k house (for example).

    Are you better off with that? Yes. Not because you'll pay your bank less, but you'll pay them during a smaller time (at 12% it doesn't help taking out a 25 year loan, it doesn't make sense).

    Also, as a bonus, usually when we already own, we go from less hood to better (better/bigger/more expensive) so if prices are low it's cheaper to upgrade.

    And on a final note, the "450k worth", is not useful money, except if you sell it to live in a less good place (or if you have many houses) which people rarely do.

    Hope it clears it up a bit!

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  • [–] 1 point 5 months ago (12 children)

    People cannot suddenly borrow more, not in the US. That is just not how it works here. The amount you can borrow is decided by income and credit score. Interest rates do not affect the loan durations you have available, you can always decide to get 10, 15, or 30 year fixed. Yes, 10 and 15 have higher monthly payments, but if your income fits, you can always get them, regardless of interest rate.

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  • [–] 1 point 5 months ago (11 children)

    Of course they can.

    If suddenly it's at 12% then you can borrow less (or you live in some place where mathematics does not apply), and conversely if it drops from 12 to 2 you can borrow more.

    Maybe not YOU, but you as in the general population. You have just never experienced it, as you have to go back to maybe the 1980s to find those expensive loans.

    All countries have laws and rules based on income and whatnot, the usa is not exceptional.

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  • [–] 1 point 5 months ago* (10 children)

    As you say, loans with interest rates that high no longer exist. But you are still incorrect with how mortgages work in the US. You absolutely cannot suddenly borrow more with lower interest rates. Once again, the amount you can borrow is based off of credit scores and income, NOT interest rates. Sure, maybe you could borrow like $25k more, maybe even $50k. But that is nothing compared to your full loan, and no bank is going to see that interest rates are low and be willing to suddenly take on more risk with little gain. What would the bank's motivation be? They gain nothing but risk by doing that, so they don't do it. They do allow for more risk when interest rates are high, because they make more money off of loans. It's the exact opposite of what you are trying to claim.

    The US is exceptional here, maybe not in a good way, however, we definitely are. I don't understand why you are trying to tell me that my lived experience is wrong and that your vague and incorrect assumptions about the US mortgage market are correct.

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  • [–] 1 point 5 months ago (9 children)

    The usa is not an exception when rates hit 12%. And they were not a long time ago. Quantitative easing made money cheap after the 2008 crash, but that's over, and cheap money is no more. So eventually rates might rise and cost per house (in inflation corrected numbers) will lower.

    It's basic math.

    Sure, maybe they'll hiver at 3-4-5% for 2 decades, what do I know, but that was not the discussion.

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  • [–] 1 point 5 months ago* (last edited 5 months ago) (8 children)

    You are still assuming that rates will increase to that level.

    Look at this. Interest rates haven't been as high as 12% since roughly 1987. That's more than 2 decades, and it's been almost 2 decades since 2008, where rates were already falling before the housing market crash. 2008 saw some of the lowest housing costs of the 21st century so far because of the amount of foreclosures. And yet, look at that, interest rates were around 6-7% and dropped to about 5%. Of note, the historical average is 7.70%, not the 12% you insist upon going back to.

    Neither one of us know what the future holds, but taking modern economics into account shows that rates are unlikely to get high enough to have that make a meaningful difference.

    Housing in the 70's and 80's wasn't cheap because of the interest rates. It was cheap because housing was rapidly expanding into suburbs, a suburbification. This is why rates could actually be that high, because the loans were comparatively smaller. You are confusing correlation and causation.

    Look at this one:

    Housing costs at 12% were not meaningfully cheaper. They were still slowly rising.

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  • [–] 1 point 5 months ago* (7 children)

    I do not assume that. sigh.

    What I said was that if rates go up a lot, prices go down.

    Edit: correct the second for inflation.

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  • [–] 1 point 5 months ago* (last edited 5 months ago) (6 children)

    They will not go up enough to make your claim valid, full stop. It has never happened in the way you've been claiming, so you can't even point to the historical data to back yourself up, it seems.

    Inflation is not something that needs to be included in this, and it only hurts your case further. Your original claim is that if interest rates go up (now you're saying "a lot", but it doesn't change anything), home prices go down.

    Well, in the 80's, interest rates went way up, but housing prices didn't go down, even in the short time period where inflation isn't going to meaningfully be a factor. It went up at the a slow rate. So, you're grasping at straws now ("correct the second for inflation" even though it didn't magically make the housing prices go down in any way that matters) seemingly because you didn't understand basic econmics in the real world and dug yourself too deep.

    Are you going to provide any sources for your bold claim? Any amount of data? Anything? Or are you just going to keep talking in circles and not providing anything of substance?

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  • [–] 1 point 5 months ago (5 children)

    Lol, basic economics 101, supply and demand is not enough? It happened in Sweden, it happened in France, guess usa is magic after all.

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  • [–] 1 point 5 months ago (4 children)

    The US isn't magic, it's corrupt and unregulated. Supply and demand only applies in your freshman econmics class, not here, as you can very clearly see on the data I provided. You have provided nothing, not anything, to back yourself up. How embarrassing.

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  • [–] 1 point 5 months ago (3 children)

    Lol whatever, one day you'll figure it out!

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  • [–] 1 point 5 months ago* (2 children)

    Lmao, nice, still not providing anything to back up your claims huh? It would have been less embarrassing for you to just admit that you have no idea how economics work past supply and demand, and yet, here we are!

    I have already figured it out, and that's why I bought a home at 3.2% interest.

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  • [–] 1 point 5 months ago (1 child)

    You still haven't figured out I'm not saying you should take a mortgage at 12% today?

    😂🤣😂🤣 You must be trolling!

    Anyways good for you, but it was not the point, whatever 🤪🤷🏼‍♀️

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  • [–] 1 point 5 months ago

    Keep moving the goalposts, sure. The claim of yours that is entirely incorrect is that high interest rates bring down home prices. They have never done that in the US.

    The emoji spam is a sign that you have completely lost the plot. Add it to the embarrassment pile.

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  • [–] 3 points 5 months ago (19 children)

    If you feel so strongly, I'm certain the big banks will take your donations. It will help others get loans.

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  • [–] 0 points 5 months ago (18 children)

    Ha ha.

    It's sad you think you're funny actually.

    I mean I know they don't teach economics in the usa (guess you're from there) but man, it's not that hard to understand. Less money=>cheaper housing, access to more money=>more expensive housing.

    But you need to think 2cm farther than how it is for you yourself right now today. I have never said that you should change for an expensive bank loan, lol, but just how market dynamics work when loand are expensive.

    Well well, good luck to you all!

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  • [–] 2 points 5 months ago (16 children)

    You are also espousing that there should be fewer home owners in a country that is already strained with wealth inequality.

    I've just been waiting for you to say something actually useful.

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  • [–] 0 points 5 months ago (15 children)

    Lol no I did not say that, to the contrary, I said there are a set number of houses (it does change but not very fast, not like other commodities like tomatoes or oil). And everyone needs one (1). That's why when people can borrow loads of cheap money, prices go up.

    That's so hard to grasp?

    Fascinating.

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  • [–] 2 points 5 months ago (14 children)

    There aren't a set number of houses, though. We can build them according to need. Many projects in my area.

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  • [–] 0 points 5 months ago (13 children)

    That's good and all and has an effect of course (many things do).

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  • [–] 2 points 5 months ago (12 children)

    You sound like a college freshman at a low-tier midwestern university who just took a freshman business course and is now an expert in the actual economy.

    You can’t collapse the assumptions of something as expansive and complicated as a housing market into basic notions of supply and demand. It is, without a bit of irony on your part, that you keep calling out literally everyone in the thread with “lol, don’t you understand basic economics???” More or less what everyone is trying to explain is that freshman level economics is not applicable to the real world here.

    The truth that you can’t see is that your framework is just too overly simplified to matter here, as are your conclusions.

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  • [–] 0 points 5 months ago* (11 children)

    Insults is what the idiot uses when he's out of rhetoric.

    It's not my fault you don't understand the the housing supply chain. Maybe you shouldn't try to "explain the basics" and sit back and think about it, it's not the simplest of things to be fair. I'm just answering because you seem eager to understand (and the lol is responses to more or less "u so stoopid, stoopid").

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  • [–] 2 points 5 months ago (10 children)

    You already said you needed to rule out fundamental realities like the ability to create more supply quickly and easily. Nor the surplus we face.

    I don't think you have the slightest idea of what you are talking about, that is all.

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  • [–] 1 point 5 months ago (8 children)

    You sound like an old AI, your first sentence is just gibberish, the second insulting.

    That will get you nowhere lol.

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  • [–] 2 points 5 months ago (7 children)

    You don't understand. I don't care. No one here does.

    The point is you are applying college-freshman level principles to a rather complicated system. People keep arguing and downvoting not because of your self-perceived smart-troll brilliance, but because you are just spouting nonsense.

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  • [–] 0 points 5 months ago (6 children)

    "no one cares about you" what a stellar argument.

    Do I "care" you think? Here is how much I care about some homeowner who thinks he's smarter than economy professors:

    Blocked.

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  • [–] 2 points 5 months ago (3 children)

    Aww, boohoo. You couldn't back up your claims, spent hours arguing for them, and then have to end it with an embarrassing "blocked" like anyone gives a shit.

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