Posted on 12/19/2022 6:41:53 AM PST by Kaiser8408a
The highest interest rates in 15 years are delaying home dreams, putting business plans on ice and forcing many Americans to agree to loan terms that would have been unimaginable just nine months ago. Biden’s anti-fossil fuel policies are helping drive up prices and The Federal Reserve is hiking rates to cool it off.
Most of all, the surge in borrowing costs is punishing the cash-poor. And it’s about to get worse as the Federal Reserve carries on with its anti-inflation campaign and keeps hiking rates next year.
As the Fed’s most aggressive interest-rate hike cycle in a generation filters through the US economy, the gap is widening between the haves and the have-nots. Even without a recession, households and businesses are feeling the financial pain.
Here’s a look at pockets of the economy that are bearing the brunt of the impact.
Housing in Holding Pattern
To trim expenses amid soaring consumer prices, the couple recently bought a freezer and stocked it with a quarter cow and half a pig sourced from an agricultural school. But they shelved their plan to upgrade to a single-family home for the time being.
“We would like to buy some land to build on, but these rates aren’t making it attractive, so we are in a holding pattern,” said Waits, who receives disability benefits.
Even in the once red-hot market of Tampa, Florida, a few people showing up at an open house is now considered a good day. “People are just waiting on the sidelines,” said Rae Anna Conforti, a realtor with Re/Max Alliance Group.
The higher rates, coupled with a surge in home values during the pandemic, pushed the monthly mortgage payment on a median-priced house to more than $2,000, up from about $1,100 just before Covid-19 hit.
(Excerpt) Read more at confoundedinterest.net ...
Energy shortages have caused an increase in prices.
My heating oil for my 2700 sq ft 1972 vintage house in southern NH was $1013 to fill up my tank. My electric bill has increased 30%.
We have no kids left in the house. So, two out of four bedroom doors get closed at night. The door to the den gets closed.
The pellet stove is burning constantly. Two out of four thermastats are set at 60F. Pellets are about $7/bag. I burn about a bag/day in Dec-March.
Long term, new construction homes will be better insulated.
People will choose to build a smaller house. The days of the McMansion are over for 95% of people because the energy to heat and cool a large house are going to bee too expensive.
Basically, we are turning into EUROPE.
1. We actually have a democracy, in which case it is the fault of the average US voter for voting in politicians who regularly run deficits to provide more goodies than we can afford.
2. We are actually an oligarchy and the incompetence of our "elites" has put them in a position where they need to spend more than they take in with taxes in order to keep the populace from rising up and revolting.
You are exactly right. Our brand new home purchased 3 years ago came with all window blinds, all stainless steel appliances (fridge,over range microwave, washer, dryer), crown moldings in all rooms, finished garage walls with opener, ceiling fans in every room and Lanai, screened Lanai, sod all around the house, automatic water sprinklers installed. New houses we bought in 1997, 2011, 2016 came with none of these features.
I was primarily referring to the gas “shortage” Jimmy Carter was responsible for.
It’s all part of the plan to dumb down America and slow it’s effectiveness mainly the economy so we can absorb all the Illegal’s crossing the boarder.
My mom has an old house with individual heaters in the main rooms. So she can heat just that part of the house that she is currently using.
Shouldn't we go back to something like that? Why did anyone think that central heating was a good idea? Maybe when people had large families and smaller homes and every room was in constant use. But now that people have larger homes and fewer people in them, central heating seems like a major waste.
Appraised value is real only in a healthy market. That is no longer the case in 90% of markets
I am in Florida. We close unused room vents in summer.to save on A/C. During the 2 cold months of Dec & Jan we use portable heaters instead of the central heat pump.
I think we still have a capitalist system with high taxes. The 10% people with higher IQ’s will always do well in this type of system. For the other 90%, inflation is a tit gripper.
Artificially low mortgage rates are what pushed home prices so insanely high in the first place!
Some could argue that this is a needed correction that can hopefully make home prices fall in line with historical norms, so that people can actually put enough cash as a percentage down, so that they have a significant stake of equity. The last 20 years we’ve been selling houses as glorified rentals for most people.
Biden has created a natural gas shortage even though we have more natural gas reserves than any other country in the world.
Can I ask what temperatures you like to keep inside the house? I am perfectly happy at 64 degrees throughout my house, which is why Winter is my favorite time of the year.
I wish I had a way to do keep it 64 inside during the summer here in the South, but I have to settle for 70 with my AC all summer.
It sure didn’t take long for people to forget about their years of screaming “rates are too low!”
In the scenario you presented, the home that sold for $240,000 is not going to be put on the market for $170,000 next year. What’s more likely to happen is that it will be sold for $240,000 … even if the buyer is an extended family of 25 South Americans with 12-15 working adults.
However, the pellet insert is at one end of the house in the family room/kitchen. My house is two floors. I use a computer fan to blow the warm air from that room into the center hallway. I sleep with the upstairs master bedroom door open to let the warm air rise up into that room at night. The room at the opposite end of the house on the main floor gets the least benefit from the pellet insert. This room has its own thermostat. It is also the hardest room in the house to keep warm because it abuts the garage on one side. It also has front and back exterior walls with a sliding door and a large gang window. Lastly it has a concrete floor and an insulated ceiling. So, it is exposed to cold in 5 out of 6 directions.
Even in 2009-10 we didn’t see a massive drop in home prices —
Maybe that depended on location. I bought a foreclosed home in 2012 for $60k. It had sold in 2007 for $197k and was in good condition, just needed paint in order to rent. Sold it in 2017 for $202k.
You are right that the shortage of housing will cushion any downturn this time. It’s been getting worse for 10 years.
Not having a PHD in economics, I am not bound by the official dogma. So I ask the question: “How does raising the price for borrowing money make overall prices go down?”
It is supposed to raise the price for businesses to borrow money in order to expand their business, or for newcomers to start a business. By throttling business formation, growth and expansion, it is allegedly going to keep the price of a loaf of bread from going to $8.00.
By stifling businesses it’s supposed to reverse the upward trend of prices? Not buying it!
The cause of monetary inflation is government issuing dollars based on nothing but the “good faith and trust of the government” (which is equal to zero).
The cure for inflation is to stop spending money like a drunken mentally feeble old communist and to stop the printing presses at the Treasury.
Dropping housing prices are often hidden for months (and sometimes years) because of unique aspects of the real estate market:
—Those who don’t have to sell immediately hold the houses off the market waiting for conditions to improve
—Transactions that do take place have a wide range of “seller concessions” not reflected in the numbers including seller paid closing costs, partial seller financing and as many tricks as the industry can dream up....
—Houses that are abandoned by the owners often take years to be sold in tax foreclosure.
—Houses owned by hedge and other investment funds cannot be put on the market because then they would have to show the losses on their books. Corporations almost always choose the “hide the ball” option over full disclosure of their disastrous balance sheet.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.