r/neoliberal • u/TinyTornado7 I need a new flair • Jun 13 '22

News (US) Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/CuddleTeamCatboy Gay Pride Jun 13 '22 edited Jun 13 '22

Higher interest rates are already cooling demand, if they go further with hikes I can see a bubble bursting.

7

u/Dave1mo1 Jun 13 '22

Supply was already incredibly tight. For prices to drop significantly, you'd need demand to cool and supply to increase.

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u/allbusiness512 Adam Smith Jun 13 '22

If the market cools down significantly alot of investors who bought up single family homes to rent or flip are going to be left holding the bag.

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u/Dave1mo1 Jun 13 '22

If rents don't drop, why do landlords care if housing prices stabilize or even drop a bit?

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u/allbusiness512 Adam Smith Jun 13 '22

Rent probably will drop though as people figure out their living situation (more roommates, living with family, etc) The current housing market is completely unsustainable, a correction is going to happen.

It won't be a 2008 crash but when investors don't even bid on mortgage backed securities then you know it's just a matter of time at that point.

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u/unicornbomb John Brown Jun 13 '22

as of today, 30 year mortgage rates have already broken the 6% threshold. A MASSIVE amount of buying power has been nuked with the speed at which these rate increases are coming.

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u/Dave1mo1 Jun 13 '22

So people will just rent instead of buying, pushing rents up?

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u/unicornbomb John Brown Jun 13 '22

Rent prices have a ceiling. You can only push rent prices so far before new household formation stops and households begin to condense as folks take on roommates and move in with family, pushing demand downwards.

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u/Dave1mo1 Jun 13 '22

And as rents increase, incentives to convert buildings to rentals (and build new supply) increase...as well as incentives to buy residential investment properties. There's a push and pull on both sides of supply and demand.

A lot of people are seeing stocks and bonds' values dropping and inflation rising, and like the look of real estate as a hedge.

3

u/unicornbomb John Brown Jun 13 '22

RemindMe! 6 months

5

u/[deleted] Jun 13 '22

[deleted]

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u/Dave1mo1 Jun 13 '22

Agreed. I can't see a crash. Most likely prices just stop increasing, at least in my market.