Originally Posted by
crewdawg
The problem is that these low rates dramatically inflated the values of the home and now that rates have gone up, the home prices are not dropping. A house I looked at in 2011, based on inflation, should be selling right around $125k. However, iit recently sold for $230k, with no real change since I looked at it. To make matters worse, insurance in increasing at a greater percentage, as are tax valuations. They auditors office just raise my tax valuation by 50% to over $100k more than I could dream of get for a selling price. Some of my friends had theirs raise by 65%.
Correct.
The problem is the cost of housing hasn’t been CPI driven once people starting looking at it as an investment versus a living expense.
This is caused by a number of factors, but principally due because there was no safe place to put money. You always have to have a spot to park money where it is safe, and with interest rates at or near zero, there really wasn’t any where else for it to go. Too much money, too few venues.
The increase in home values isn’t a strict degradation in buying power that simple inflation causes, where everyone is a loser. In the case of housing, there is a winner, namely the owner.
Interest rates have crept back to normal. There’s now a place for safe cash, and maybe the pressure on housing will subside a bit.