The only thing I have to say is that I would expect the government to push more federally backed mortgage loans at their preferred interest rates if they sense a slowdown in private lending. Heaven forbid markets correct themselves.
Vacant Housing Estimate - https://fred.stlouisfed.org/series/EVACANTUSQ176N
So, looks like closer to ~11% as of that data.
By the time it reaches ground level nothing left but crumbs
There is no way out. Get out of debt and hoard as much as you can. Bad times are coming.
Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.
For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.
So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.
In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.
The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.
Exactly
If the buyer can only afford $1,000 a month with a 30 yr mortgage - that sets the upper bound of the list price of the asset
If rates rise the monthly payment stays the same, but the buyer can only afford a lower priced house.
If rates go down those $1,000 can now pay for a higher list price
"The market can stay irrational longer than you can stay solvent".
"When the music plays, you have to dance."
I'm just suggesting not to speculate with borrowed money.