OK I'll take half that. and set the target to 11 percent. Wonder if that's enough to roll out a real crash .
Precisely why the likelyhood of 11% interest rates hapening is pretty much nil. If the US falls into a recession, rates are going back down. Most likely, 2-3 years from now they will be around what they are today or even a little lower.
its not the interest rate that ultimately determines of what the housing market is going to do. it is the perception that housing value would go up forever, which is causing the sharp rise. when that perception changes, having interest rate at 0% will not make any difference (japan). and the perception is beginning to change.
Affordability is the only thing that matters in housing prices. You can think all you want about something going up in value but if you can't afford it then you can't affect the values. Interest rates the primary determinant in affordability. Japan has zero population growth and not a good comparsion. John
John, Wouldn't your argument (japan) also have to take into account units available vs units needed as its essentially the old supply and demand argument. I've seen housing markets where supply and demand ratios didnt change and affordability remained constant but prices rose or fell. Just look at various markets since 2001 for examples. Although there is an increased element of rationality in houses ... its increased not absolute. Perceived affordability, perceived supply&demand and perceived future value are the things that will determine prices. Perceptions continue to be only somewhat rational.
It has been the rise of interest rate that cause the onset of this change in perception because affordability had been affected. People are beginning to realize thst not everybody can afford the payments, suppy/backlog increases, home prices cooling leading to decline ... So yes, you maybe correct, but interest rate still plays. Unless all of a sudden, income level jumped 50% for all, then even @ 11% rate, mortgage would still be affordable..
I would guess that you know a lot more than I about various housing markets and I would guess that there is a natural ebb and flow in all markets. All I know is that in America the housing market went nuts in a few places and the reason was ultra low interest rates, and loose lending standards that allowed many people access to homes that never had access before. I would guess too that a good 2 million or so households here are occupied by illegals and that must have had a decent impact on demand during this last cycle. I mean something big is out of whack here or else rents wouldn't be half the cost of ownership. John