If housing costs are cooling why a rate hike?

[LuvOrlando]

Groceries and gas are high because prices are being set high, not because demand is outrageous. The fact people are modifying what they buy says items aren't inelastic so it's plainly not high demand. Most housing areas are already cooling to more normal levels, with overpriced homes sliding back to more accurate values sort of in between pre 2008 drash and high demand 2020. So what in the world is supposed to be accomplished with raising rates? This won't make stores drop prices who are hiking them to make up for losses during 2020 & 2021 (not really mysterious what they are doing) & it won't make more gas showup at the pumps. Very strange reasoning, seems destined to derail for first heartbeats of growth in ages. What the what?

 

[tvguy]

Groceries and gas are high because prices are being set high, not because demand is outrageous. The fact people are modifying what they buy says items aren't inelastic so it's plainly not high demand. Most housing areas are already cooling to more normal levels, with overpriced homes sliding back to more accurate values sort of in between pre 2008 drash and high demand 2020. So what in the world is supposed to be accomplished with raising rates? This won't make stores drop prices who are hiking them to make up for losses during 2020 & 2021 (not really mysterious what they are doing) & it won't make more gas showup at the pumps. Very strange reasoning, seems destined to derail for first heartbeats of growth in ages. What the what?

In many parts of the nation housing prices are only starting to cool. Actually, a number of cities houses still sold at record highs in June. Prices are still near record highs. And even with the rate hike, mortgage rates are still pretty low. My first mortgage was 12.25%, first refinance to 9%, second refinance to 6.25% which is about what mortgage rates are at now.

 

[disykat]

I thought the rate hikes were being done because of inflation and then the housing prices are dropping because the buyer pool can afford less due to the rate hikes.

 

[LuvOrlando]

Inflation happens when too many people compete for goods and services & prices can be an indication of this. But prices that are artificially inflated through manipulation, like a ticket scalper can do or in the case of a monopoly can look like and act like inflation, but are not if you don't consider the whole picture. These mimics are market manipulations.

Check out deadweight loss in relation to monopoly and such.

 

[disneychrista]

The flip side of interest rate hikes is that my Money Market account interest as increased from 030% to 0.47%. The savings account haven't yet though, they are still at 0.30%.

 

[tvguy]

The flip side of interest rate hikes is that my Money Market account interest as increased from 030% to 0.47%. The savings account haven't yet though, they are still at 0.30%.

I remember putting my life savings in a Money Market in 1981 at 16%.

 

[disneychrista]

I remember putting my life savings in a Money Market in 1981 at 16%.

I think when I opened it, only a few years ago, it was at 2.00%, it steadily dropped since then.

 

[MillauFr]

Most housing areas are already cooling to more normal levels, with overpriced homes sliding back to more accurate values sort of in between pre 2008 drash and high demand 2020.

Housing prices are never over or undervalued. They are always priced at what a willing buyer pays.

 

[adkkev]

If you have HBO Max watch the July 24th John Oliver show. He spends a good part of his show exploring the reasons for inflation and what the Fed is trying to do. It’s also available on YouTube.

 

[tvguy]

Housing prices are never over or undervalued. They are always priced at what a willing buyer pays.

Willing to pay, and apparently able to pay.

 

[GAN]

Inflation happens when too many people compete for goods and services & prices can be an indication of this. But prices that are artificially inflated through manipulation, like a ticket scalper can do or in the case of a monopoly can look like and act like inflation, but are not if you don't consider the whole picture. These mimics are market manipulations.

Check out deadweight loss in relation to monopoly and such.

Not sure what you’re saying here ….demand is outrageous, nothing is artificially manipulated. Depending on what you do for work you may be dealing with it everyday. While the demand for food may not be any higher than it was 5-years ago, ALL the other costs associated with producing beef have gone up because of demand issues …transportation, the new piece of equipment, the maintenance of a building, etc. This all combines to higher prices on the shelf. A bank teller may not notice, but someone in the industrial or construction sector sure does.

 

[Cheburashka]

seems destined to derail for first heartbeats of growth in ages.

Derailing growth and slowing spending is their plan for combating inflation. No one out there (of influence in the financial world) believes that this inflation is going to end without a recession. It stinks, but it's already on its way.

That's why it's important for our leaders to do everything possible to avoid inflation in the first place, rather than simply assume that it can't happen, even given predictable provocation.

 

[mrodgers]

Housing prices are never over or undervalued. They are always priced at what a willing buyer pays.

Society in general does not understand that concept. They will instead stand in line with their wallet and credit card held out complaining that they are being gouged on the price of an iPhone. They don't understand Apple would not be selling $1500 iPhones if no one was willing to spend $1500 on an iPhone.

 

[Moliphino]

Not sure what you’re saying here ….demand is outrageous, nothing is artificially manipulated. Depending on what you do for work you may be dealing with it everyday. While the demand for food may not be any higher than it was 5-years ago, ALL the other costs associated with producing beef have gone up because of demand issues …transportation, the new piece of equipment, the maintenance of a building, etc. This all combines to higher prices on the shelf. A bank teller may not notice, but someone in the industrial or construction sector sure does.

I wouldn't say nothing is being artificially manipulated. Lots of companies are making record profits now with the "inflated" prices.

 

[GAN]

I wouldn't say nothing is being artificially manipulated. Lots of companies are making record profits now with the "inflated" prices.

Sure some are gouging ..but basic math tells you a business with a profit rate of 20% is making more money if costs are up. 20% of $1000 is $200, 20% of $1500 is $300 ..."record" profits!

 

[Cheburashka]

Society in general does not understand that concept. They will instead stand in line with their wallet and credit card held out complaining that they are being gouged on the price of an iPhone. They don't understand Apple would not be selling $1500 iPhones if no one was willing to spend $1500 on an iPhone.

Housing and iPhones are two very different commodities, with much different intensities of demand. Not a useful comparison. People need a place to live, so a person cannot just decline to get housing and remain homeless while vainly waiting for the market to respond. The market will never notice what one person does or doesn't do, anyway, so an individual trying to make a point that way is wasting his or her time.

Also, very many people don't pay full price for their iPhones. I bought both mine and my son's last year for half price because I bought them where I get my cell phone service. Yes, I had to continue my service contract to get the deal, but I'd have to pay for cell service somewhere at the same rates anyway. Undoubtedly a huge proportion of phone customers buy theirs the same way.

 

[RedAngie]

I remember putting my life savings in a Money Market in 1981 at 16%.

I had one that paid 18.5% about the same time.

But I think it had to be $10K minimum balance.

 

[MillauFr]

Sure some are gouging ..but basic math tells you a business with a profit rate of 20% is making more money if costs are up. 20% of $1000 is $200, 20% of $1500 is $300 ..."record" profits!

Gouging is a nebulous term that is meaningless.

 

[GAN]

Gouging is a nebulous term that is meaningless.

Yeah, it's meaningless ...as long as swindling and overcharging is acceptable to you! lol...

 

[MillauFr]

Yeah, it's meaningless ...as long as swindling and overcharging is acceptable to you! lol...

That depends on the definition of those terms. As long as the price is clearly displayed prior to me deciding to purchase a good or service I see no problem with private corporations charging as much as they want. In fact I believe they should adjust price so that demand and supply are in balance and profits maximized.