Hacker News Reader

Comment by jackcosgrove | Hacker News Reader

In theory, yes. In practice, no.

https://www.calculatedriskblog.com/2013/06/house-prices-and-...

"There’s no strong correlation between interest rates and home prices,” said Douglas Duncan, chief economist at Fannie Mae.

View on HN

I would say looking at those graphs that the interest rates going down from ~1982 look pretty correlated to the real house prices going up till ~2008. Especially for the post 1999 or so period. Then we had the bubble, then we had a crisis from a slight raise of rates. House prices move really slowly. You also probably want to look at real rates rather than nominal rates, for some of the period rates were high because inflation was also high.

If interest rates keep heading up it's a good bet we're setting up for a repeat of that last crisis. Let's hope the banks are better prepared and have loaned money to less questionable people.

It would also be instructive to see the shorter term rates, not everyone finances for 30 years.

So I would say in theory and in practice interest rates have major impact on house prices. We would not have the bubble without the low interest rates as people wouldn't not be able to finance the purchase of those houses at those prices.

> hief economist at Fannie Mae.

So the same company that lied through their teeth during the 2008 crisis and buildup to it, to give the banks ability to package junk loans as AAA CDOs? The one that had to be bailed out by the taxpayer eventually? Sure, let's listen to them, they sound like a trustworthy source.

He wasn't working there at the time - only started in 2008 post subprime crisis.

Please don't argue ad hominem, if you have an issue with the statement then make your objection directly.

There is a fallacy about logical fallacies: using them to discredit non-logic based arguments. When one wants to assess the credibility of anecdotal facts, it is entirely fair to ask whether a person is a reliable source for this information. This is why character witnesses are acceptable in court. We are not trying to prove a theorem or explain the results of an experiment. We are trying to use our intuition, for lack of better tools and information, to assess what we hear. So saying that this person can be considered unreliable as a source of information in this kind of analysis due to past behavior is valid. Objective data and detailed explanation should be provided to back up his argument logically in order for it to be acceptable, rather than taking Duncan's word for his analysis of the data he has presumably seen.

In this case, the author's data-based assertion of non-correlation is much weaker than Douglas Duncan's. I think based on Duncan's background, it is fair to dismiss his quote entirely without further context and base conclusions only on the data presented. In addition, since the author presents an unreliable source, one may suspect the data is skewed to support that source, conciously or unconsciously.

I agree to an extent, but I don’t see the post that I replied to as possessing any good faith at all based on the wording.

Taleb calls these people IYIs: intellectual yet idiot.

There is nothing exceptional about THIS economist that would make him right. The OP had the right idea.

What’s your point?

The point is that it's not an ad hominem attack. The entire profession of economists on balance do not call anything correctly.

It is an argument from ad hominem. Or are economists wrong even when they say something you'd agree with?

The original comment ("In theory, yes. In practice, no.") is from ad hominem. It does not provide any actual thoughts or arguments, it simply says that there is an economist that thinks this way, implying that it should be enough of a reason to trust it. There was no argument except for ad hominem! Of course the response to that can only be a defusal of such argument.

Err did you click on to the link provided with that comment at all?

The semantics of the philosophy of the argument are irrelevant. The basic point is that predictive economists are nothing more than highly educated charlatans.

You’re very keen on pushing that point.

The house-price-to-income ratio has been historically high these last 1-2 decades, which will result in interest rates playing a bigger role in prices than they have in the past. Especially in the hotter coastal markets where affordability is a major issue. Part of this is structural as well, as most banks have strict debt-to-income ratios for their mortgages, so if interest rates go up, either incomes need to rise or prices need to come down to maintain the same level of demand.

If interest rises, sellers still want the same high prices for their house. Buyers won’t be able to afford them though so the houses will remain on the market for a lot longer.

Reply on news.ycombinator.com