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Comment by modeless | Hacker News Reader

Hmm. So if a house cost $2m at 3% interest last year, then interest spikes to 18%, the house should drop to $550,000? Yeah I really don't see prices dropping 70%, sorry. As much as I wish they would, as someone who wants to buy their first house.

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If interest rates go to 18%, you bet the house would drop to $550,000.

I'm expecting house prices in my country to drop at least 30% in the next couple of years and I'm only expecting interest rates to get to around 10%, 18% would destroy the housing market.

Well I hope I'm wrong and you're right, because I expect interest rates to keep rising and I could really use a 70% drop in house prices.

If interest rates are 18% the crash will be so hard that some residences can’t be given away (in undesirable locations) because the tax and maintenance will be higher the home value, and the economy will be fucked. You will probably be out of work.

If you can get a job as a liquidator and have lots of cash as it’ll be hard to borrow at all.

The last black swan like that was probably before my time (1980s) but maybe the ERM debacle in the UK was close.

18% implies a very high inflation rate, 15% or more. At that rate employers will be forced to give significant raises or else purchasing power would drop 50%+ in only three years. Employers tend NOT to match inflation, but they will have to give more than the usual 2-3%. Perhaps 10%, perhaps 13%, depends on the employer, but those higher salaries will send real estate to the moon even after the initial 50% dip. Of course these are extreme numbers and reality is not likely to get this extreme since "inflation" at the moment is primarily (lack of) supply side driven.

> Employers tend NOT to match inflation

Eventually they’ll have to or people will be spending 100+% of their income on basic food and shelter with no way to afford getting to work.

Yes, your opinion seems based on how the numbers sound rather than what they imply/mean. The United States reaching 18% interest rates would have absolutely massive effects, we've been in a low interest rate environment since the GFC and 10% has not been broken for ~40 years. House prices plummeting would be the least of it.

I'd take the bet that it would get close(sub $1 mill) all else equal. In some areas houses dropped over 50% during the financial crises.

Around here they barely dropped at all and for barely more than a year.

Out of interest, where?

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