RE:RE:How is inflation "going back up"spacegimp wrote: One of the FED's mandates is to maintain price stability, and we all know how residential real estate has gone parabolic. What if they don't really intend to drop rates for the next few years in order to crush these residential valuations to increase affordablity to younger generations ? Average wage to home prices is still at historic ratios .
It may be a bit counter-intuitive, but unless there's a sufficient oversupply of housing, increased interest rates have the effect of increasing lease-cost of housing (and so, increase inflation when considering housing costs). New build costs are still above current home prices, so it's unlikely that an oversupply of housing happens anytime soon to put pressure on housing prices.
In all likeliness, keeping rates high will send the economy into recession before it affects global housing prices. Some local housing price pressure may happen in cities where prices have rocketed like Vancouver or Toronto, but is unlikely to happen as a market wide event.
The real problem underlying housing costs isn't the low interest era, but rather the steep increases in building costs, combined with increased/quicker new housing needs compared to the past.