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Comment by yrgulation | Hacker News Reader

Oooh, i just sold a flat here in europe with the intention to buy something bigger. It would be fun if i bought it back next year at a lower cost or if house prices dropped just as i buy a new one. With rising interest rates and inflation it will be the little people that will suffer. Because those with liquidity available will buy properties at a discount, while regular folks wont afford them anyway since everything else costs more.

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My wife and I just started saving to buy a house, and I was resigned to the fact that we would have to buy into a super-inflated market. From my perspective, hearing this from the Fed is great news, but I realize that my own personal bias probably clouds my view quite a bit.

Realistically, the only real power they have to decrease house prices is to massively increase interest rates.

Unless you've saved enough to buy a house outright, you'll probably end up paying in interest what you would have paid in principle. Whether it ends up being better or worse for the average buyer remains to be seen.

> you'll probably end up paying in interest what you would have paid in principle

Is that a better outcome from a mortgage interest deduction perspective?

Long term, inflation tends to reduce income inequality (up to a point, I've generally seen 10-15% quoted as the sweet spot).

The problem with inflation and poor people is more short term: wages are one of the last things to inflate, so there is still a short term drop in buying power. This applies to everyone relying on wage income, but the poor have the least slack to manage it.

> wages are one of the last things to inflate

of alternatively they dont inflate at all and you lose a lot of purchasing power.

Do US rates affect the price of housing in Europe?

All of europe is having similar issues. Many eu countries and the uk have increased their rates to try and stop inflation and as a result fewer people afford mortgages driving prices down. But the issue in some places is that builders have stopped building due to increased costs and as such the offer is lower. No clue how things will play out.

Depends but overall the US rates put pressure on euro and generally all other currencies. In my country, which does not have euro, the last hike of the US rates got the currency to drop over 2% (which is already super weak). This means that our central bank will need to bump its rates even further.

There is a relationship, yes, but it’s fairly indirect. More important is simply that the ailments of the US are suffered by the west in general. The UK raised its interest rate this week, by less than the US, but with a feeling that a much larger rise will come in August.

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