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John Bolt's avatar

Rising interest rates lead to price falls—that is what they do, every economist and most lay people know this. That absolutely does not mean there isn’t a supply glut or that housing is somehow becoming more affordable, because a price equilibrium will be reached at the same monthly cost burden consumers could support as before—which was unaffordable. The overall asset is more affordable, the loan most Americans require to purchase the asset is more unaffordable. There is no effect on supply that would lead to structural affordability, and these shifts in asset prices and financing have little to no effect on renters.

What is this article even trying to do?

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Bardamu's avatar

I think in part the controversy is that most people alive have only seen housing prices fall during the recession, and thus assume that only large, catastrophic events can force housing prices down.

From a general commodities perspective though, this is strange because for centuries the price of housing has fallen relative to the time value of money, which is why people can afford to live in insulated, stand alone, structurally sound houses on their own without needing to always buddy up with two or three other families. If anything it’s housing value growth that is unusual.

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