Quote:
Originally Posted by PeteMoss
I think the odds that housing pricing are going to decrease in any material amounts are slim even if we did start building like madmen.
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Yeah, it's more likely it'll follow the historical trends that we saw in similar situations (early '80s, early '90s, '08-'09 to a lesser extent). Right now we're probably near peak unaffordability because of interest rate hikes. But with higher rates there will likely be an economic downturn (if it hasn't started already) and a softening of prices. They won't necessarily go down drastically, but slight drops or stagnant prices coupled with inflation will erode Real Property prices over time. That, coupled with an inevitable reduction in interest rates will improve affordability.
At least that's what happened in the past rate-hiking scenarios. In the early '80s the mortgage payment based on the median home price would have required over 70% of the median income to cover, but within a few years it was below 40%. Then the same thing happened in 1990, where it was at 60%, before dropping into the 30-40% range over time. And now it's back up into the 60-70% range, and it will likely drop again.