Current Events > Federal Interest Rate raised AGAIN

(+) Yeah! (+)

Hopefully housing prices will go down >_>

Was waiting for breasts inflation joke

Rise bust size should rise again

Poorly posted...

I was an Inaba's resident for 4 years. The only thing that I need to worry about is a serial killer pretending to a bad cops who can't stand seeing blood.

This is a spoiler.

...Probably as much as a spoiler as (FF7 spoiler) Aerith being killed by Sephiroth is at this point, but still.

how exactly does raising the interest rates help lower inflation? Can someone explain in laymans terms?

also, anyone know what this will make mortgage rates climb to??

NeonOctopus posted...

Hopefully housing prices will go down >_>

People keep saying this, and they never do. Its just comical at this point.

AlCalavicci posted...

how exactly does raising the interest rates help lower inflation? Can someone explain in laymans terms?

also, anyone know what this will make mortgage rates climb to??

A prime factor for rampant inflation is when the populous has too much spending power. They are buying everything. If the fed raises interest rates, it makes banks raise there interest rates which makes borrowing money stop which makes the surplus of money in people's hands and spending go down which makes inflation go down. If the fed is too aggressive with inflation hikes, people don't just spend less, they stop spending all together and it can trigger a recession.

As far as interest rates go, it is typical to see bank and federal credit interest rates rise to a minimum of 3% higher than the federal interest rate. I think currently, the average housing market interest rate is 6% +/- 0.5%.

NeonOctopus posted...

Hopefully housing prices will go down >_>

The irony is....

corporations don't buy houses using borrowed money..........

corps buying houses with cash, get better deals, can buy more houses.....

as corporate profits reached 50 year high

meanwhile, harder for regular joe to get a loan now

Pepys_Monster posted...

People keep saying this, and they never do. Its just comical at this point.

Historically, you are kinda right, but prices are so far and beyond elevated that they kinda have to. Higher interest rates is pricing out a lot of people from affording monthly payments, specially when the average home price today is 500k. At 3% that would just be a 2,100 payment which many middle class families can easily afford, while at 6% it turns into a 3k payment which is prohibitive for most people in the US. Theres been a lot of cancelled purchases due to this lately which makes for a rise of inventory, houses sitting for longer time and sellers cutting prices to attract buyers.

My fear is home prices going down and corporations, rich people outright buying them. Hell lots of ppl are saving just to do this.

CARRRNE_ASADA posted...

but prices are so far and beyond elevated that they kinda have to.

Why do they have to?

CARRRNE_ASADA posted...

My fear is home prices going down and corporations, rich people outright buying them. Hell lots of ppl are saving just to do this.

Literally professional articles made about corps using cash to buy homes at thousands above their actual value pricing out regular people.

"Oh! We can just raise the rate to borrow money to combat this!"

uhhh

BignutzisBack posted...

Why do they have to?

They dont. Its just hopium.

AlCalavicci posted...

how exactly does raising the interest rates help lower inflation? Can someone explain in laymans terms?

loans are more expensive and you get more from leaving your money in the bank.

those two things will lead to people spending less money in general. Which means demand for products will go down which means prices will go down. Which helps combat inflation, since inflation is just basically shit getting more expensive (or you money being worth less, however you wanna see it)

BignutzisBack posted...

Why do they have to?

Because most are artificially inflated? Going to almost double in value is not normal or sustainable and was only happening because people could afford the monthly payments thanks to historic low rates.

CARRRNE_ASADA posted...

Because most are artificially inflated? Going to almost double in value is not normal or sustainable and was only happening because people could afford the monthly payments thanks to historic low rates.

Just like how the cost of food, gas, and everything else has gone up? Are they "artificially inflated"? Do they "have to go back down"? They won't.

Once inflation goes below like 4% I'm gonna buy a house. At that point mortgage interest rates will still be high, we will be in an economic slump, and house value will be the lowest. Then I tough it out for a few years and refinance once interest rates go down to try to boost the economy.

I know you shouldn't time the market but this type of timing works because most people can't afford to be "ahead of the curve" like this. People aren't going to buy houses when their jobs might be in jeopardy, they are losing money in stocks, and interest rates are sky high.

Also, this was a predictable rise in interest rates. The fed has been behind this whole time. The market already knew this was coming and its already been priced in. The fed is now catching up with its back to back 75 basis point increases. Some experts seem to think inflation is starting to peak.

Now most likely it'll be a wait and watch scenario. Because increasing interest rates has a lag in its effect on the economy. That lag can be months to years.

Pepys_Monster posted...

Just like how the cost of food, gas, and everything else has gone up? Are they "artificially inflated"? Do they "have to go back down"? They won't.

Well gas is starting to come down. A lot of those high prices were or are due to supply chain issue from covid, but Im with you that most products wont be coming down.

But there is a big difference between a few cents or dollars for essential products than it is to test the limits of your purchasing power for a car or house and suddenly getting priced out.

Houses will HAVE to come down cause they are LOSING a big number of POTENTIAL BUYERS each day that passes. Check the numbers of cancellations on houses due to buyers suddenly not being approved anymore. As I said...the difference between 3 to 6% on a 500K house is around 1,000 dollars.