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The Fed's mandates are full employment and price stability. The benchmark rate and their ability to buy various flavors of securities (bonds, etc) are the only tools at their disposal. The US economy is at full employment and almost back to the 2% inflation target ("soft landing"). If there was more supply of housing, higher mortgage rates would drive down asset values, but there isn't enough supply (for various; reasons the country has underbuilt for two decades, people tied to their low rate mortgages who won't move now, etc).

If you can coax new supply on the market at sufficient quantity, those transactions at these money rates will drag down comparables via lower price transactions over time. How quickly is a function of new supply velocity.

The only idea I have is a new mortgage program that allows someone who is selling to finance another home to keep their mortgage rate on a portion of the new mortgage. For instance, I have a 3% mortgage on a $300,000 home. I want to sell it and purchase a $700,000 home. I can sell my home for $500,000. Current mortgage rate is 7%. If I could sell my home and purchase the new one with a mortgage that is 3% on 300,000 and 7% on the additional 200,000 I think it would make selling quite a bit more enticing. This scenario is assuming I would put the $200,000 I made in equity as a down payment and I am ignoring fees/commissions for simplicity sake.

this seems like a nice idea, but consider the fact that banks don't want people to have these low rates.

It is possible and voters do support it. Nobody has lost an election for being a YIMBY yet. But the trick is that it has to be done by legislation at non-local levels, because voters only try to restrict competition at local levels.

> because you cannot make housing affordable without lowering the value of your voters homes.

That would be deflation, but we can still have disinflation. If housing prices stop increasing, then they'll increase by less than wage growth, making them more affordable.

Also, voters may realize that increasing the value of their homes doesn't make them richer if it also increases the price of other homes they want/need to move to.

Wage growth can never make housing more affordable. This is such a common misconception. You can't "pay workers" your way out of a housing crisis. Give everyone $10k more a year and houses prices simply jump to accommodate it.

You have to build new housing. It is literally the only fix (other than population decline).

I was talking about building housing in that post. That's how we'd keep the housing prices flat (in nominal terms), by building it.

Ah, the myth of the sentient house price. Look at those clever little house prices! Somehow they just know that workers all got an extra $10k/yr. You can't fool them!

Look, prices don't control themselves. They go up because buyers choose to spend more and because sellers choose to demand more. It's not automatic, and its not inevitable, but changing it requires a values shift.

Parent is correct generally speaking. It's not that the prices are sentient, it's that sellers (of anything) are always charging as much as they can for their house and not a dollar less. If everybody suddenly has an extra 10K, the seller will notice that through an increase in bids for their house at price X, and a single surviving bid at price X+10K (the person who would have bought the house at X before everybody got the 10K). The option for the person who has X+10K would be to lose the bid, but they know they would face stiff competition at X for their next purchase attempt, thus they will eventually accept the higher price given that they have the money.

Of course, this is an oversimplification. But looking at the market as a whole, the more money people have to spend, the more you can charge for the house.

The price will be whatever it needs to be for the market to clear.

Want lower (real) prices? Either convince people to move elsewhere, or build more housing.

I have no idea how to interpret this comment.

In the first part you are mocking "sentient" house prices, but then in the second part you explain how house prices are "sentient".

Surely you put together that making more money results in a "values shift", correct?

House prices are not sentient. Humans are sentient, and given a value (+) system that prioritizes individual return on investment via maximising sale price, yes, more income on the part of buyers will cause buyers to be willing to pay more, and sellers to require more. But these are human decisions, and there are other outcomes possible.

(+) moral, philosophical, personal values, not financial values

Ok?

> voters may realize that increasing the value of their homes doesn't make them richer if it also increases the price of other homes they want/need to move to.

Folks planning to use their home equity for things that don't require them to move do, in fact, end up richer. For example: a higher home value allows one to borrow more for e.g. college for one's offspring or to start a business, provides for a larger inheritance (or donation) from one's estate, etc. Home equity is real money that people do use without selling their homes.

This is both temporally and geographically myopic.

Temporally: in the late 1990s, I had a mortgage with a 7.25% rate. These days, I'm one of the Haves. While I may have done better than many of my peers due to my work history, a lot of people my age, or more precisely, people who bought houses when 7.25% was considered a deal not to be missed, are in the same position.

Geographically: billions of people around the world rent rather than own, and for the most part it does not hamper their "personal investments".

Granted, getting from a place/time where people expect owning a house for 5 years to show 50-100% gains to one where a house is unlikely to gain value at all will be challenging. But we can take it slowly and minimize the pain while maximizing the gain of backing out of this insane way of treating housing.

> in the late 1990s, I had a mortgage with a 7.25% rate. These days, I'm one of the Haves. While I may have done better than many of my peers due to my work history, a lot of people my age, or more precisely, people who bought houses when 7.25% was considered a deal not to be missed, are in the same position.

Inflation adjusted, when you last paid 7.25% in the mid 90s, house prices were far lower. Today, buyers entering the market for the first time are getting smacked with high rates & record high purchase prices in many markets thanks to two decades of ultra low interest rates.

Not denying that at all. But this wasn't laid out in the GP comment, which contrasted people from the "before" time and the "have-nots" in a higher rate environment.

There are many other things about the mid-2020s that differ from the 1990s, but interest rates alone are not a determinant of someone's lifetime economic trajectory.

As a young Have Not, I'm just waiting this one out. I see 1 of 2 options in the future:

1. Prices go down because nobody can buy the homes at their current prices given current interest rates

2. Prices stay up because large buyers scoop up the homes. Over time, fewer and fewer Americans actually own homes. Eventually the majority of voters will be Have Nots and the scales of power will tip.

It's not mega investors who are buying most homes. Most homes are just going to people that saved a fuckload of money over the pandemic or people that already have a home and can use its equity to get another one. The economy is doing very well, I don't think there will be any shortage of people who want homes, even at current interest rates and prices.

History says that #2 is where we are heading. That was Piketty's main thesis in Capital in the 21st Century. The era of relatively inequality we saw after WW2 was an aberattion. We are returning to the historical norm of high-inequality.

Still remains to be seen how much closer we have to get to feudalism before anything happens to change our trajectory.

Building housing is expensive, especially when financed traditionally Wich needs to be made back. Government subsidies could make it trivially cheap to build housing. We just have to get over that S word.