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Comment by zpeti

2 years ago

> The feds actions show they want high asset prices relative to wages.

It’s an economic axiom that high interest rates mean lower asset prices.

So can you explain what you mean?

Also - as far as I know every us city except for Miami has had a decline in real estate prices - so again - where are you and everyone in this thread getting information? Anecdotes?

6 comments

zpeti

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willcipriano  2 years ago

Asset prices have been skyrocking for decades. Interest rates remained low.

Wages finally start to creep up after decades of lagging behind productivity, panic, need to raise rates aggressively.

When home prices double in a decade there was no concern, when a burger king employee asks for a 10% raise its a crisis.

HarryHirsch  2 years ago

It’s an economic axiom that high interest rates mean lower asset prices.

If that is the case, why is housing so expensive?

  • state_less  2 years ago

    To be precise, high real rates generally means lower asset prices. We came in at 0.4% Month over month CPI. Overnight rates are 5.5%, so we still have a historically low real rate (5.5-4.8=0.7% CPI, 5.5-3.6=1.9% Core CPI).

    The Fed hasn't really squeezed hard. They're looking for a soft landing. We went from super loose negative real rates to just loose policy, but to hear Jay Powell say it, we're already tight and restrictive. We probably need to get up to 3%+ real rate (maybe 6%+ overnight rate) to get a good washout and some forced selling.

  • zpeti  2 years ago

    Because interest rates have been artificially low since 2001. And then we got money printing too after 2008.

    Housing prices have nothing to do with 2023 interest rates. Well they do, the fact that they are stalling/falling is very much to do with the higher interest rates.

    You can't look at 20+ years of loose monetary policy, take the 1 year of high interest rates, and blame that on high asset prices.

    Btw, have you looked at stocks and bonds in the last 1 year? PE ratios? They've collapsed. Because asset prices collapse with high interest rates, and stocks and bonds are much faster at responding than real estate.

    But still, real estate prices have fallen in every major city bar one.