> if money is plowed into housing, the homeowner has more cash when they sell.
but it's not expensive _everywhere_. It's expensive in some of the most desirable places. And housing has some issues unrelated to the market - such as NIMBYs stopping new constructions.
>but it's not expensive _everywhere_. It's expensive in some of the most desirable places.
The fact that the median and average house prices have exploded signifies that the housing market is in a bubble. It's not relevant that house prices have not increased equally everywhere. Ultimately, after the bubble eventually bursts, it will leave a lot of people indebted to banks with their real ownings not matching the debt. This translates to a decrease in consumer consumption, meaning slower economic growth. Resources of the society will be more directed towards customers who have more wealth, meaning those who weren't part of the housing crash. Likely customers from abroad.
Obviously we're talking about percentages, but that's how economy works and that translates to very real changes in a many people's lives.
Notice you said disposable income rather than income, there is a huge difference.
But I think people recognize the housing bubble that popped in 2008 as a bubble. Saying we haven’t reached the peak of the last bubble doesn’t mean we aren’t in a bubble.
You mean artificially high interest rates. If interest rates fell negative then the money supply would shrink and there would be less unneeded money to speculatively buy houses with. Alas, we live in a world in which negative interest rates were banned and therefore the money supply and economy must constantly grow to raise interest rates above 0%.
I find it frustrating that people ignore basic market principles when it is inconvenient for them. Like, people get richer (everyone is saving incredible amounts of money), the population is no longer growing, there are fewer and fewer investment opportunities and yet for some reason, people think they have a god given right to high interest rates anyway, even when those are impossible to pay without inflation.
the inflation target was barely met (and according to arguments about service degradation) it was undershot, so no, the interest rate was not too low. (there's no non-artificial rate in a central bank managed economy)
> The fact that the median and average house prices have exploded signifies that the housing market is in a bubble.
It doesn't signify that. The US has long since switched over to a permanently low interest rate environment due to the extreme national debt that the Fed has to manage. Housing is going to stay artificially expensive on a longer-term basis accordingly. Housing only deflates on a sustained basis if interest rates go up a lot on a sustained basis, and that's not going to happen (we're coming up on 14 years into the forever low rates era).
We've been enjoying very high rates of consumer inflation and what has the Fed done? Zilch. Mostly all they've done is jabber, which is most of what they can do now: endlessly talk about how they plan to raise rates. Why? Because they can't do anything of consequence and they know it. It's a humiliating failure of their supposed mandate.
One of the many consequences of forever low rates is forever artificially inflated asset prices.
Real-estate values broadly are not a bubble, it's dollar debasement, which is why gold is going to become normal up toward $2,000 and oil is going to be normal at $65-$75+.
Mediocre economic growth will (presently is) ultimately take care of the elevated rates of inflation, rather than the Fed hiking rates by a lot. Later in the decade the Fed will be back to talking about how they'd like to spark higher rates of inflation, as typical annual real GDP growth sinks below 2%.
>It doesn't signify that. The US has long since switched over to a permanently low interest rate environment due to the extreme national debt that the Fed has to manage.
Strange, Germany did mild austerity over the 10s and the end result was even lower interest rates. The current debt to GDP is 59,8% which is perfectly "healthy". Lower interest rates mean less money is spent on interest and more money is spent on servicing the principal. The only conclusion you can derive in the EU is higher debt and more risk => higher interest rates. Yet everyone thinks we are bailing out Greece when in reality the ECB is bailing out wealthy Germans.
>One of the many consequences of forever low rates is forever artificially inflated asset prices.
You call it artificially inflated but lower interest rates don't make e.g. housing more expensive. Your monthly payment is still the same. Lower interest rates make it easier to build more housing which can reduce the monthly cost of housing over the long term.
the Fed has a dual mandate, there are still a lot of people who doesn't have a job due to the pandemic.
this inflation spike due to the combined effects of overspending on products in quarantine (partly fueled by unemployment checks, that should have been sent in monthly installments to discourage spending it on big items), and the energy market chaos thanks to the war in Europe. (and even though a small portion of the supply disappeared the price curve is steep, the new price point is much higher up as we see.)
should have the Fed done more about this? yes, definitely. but just as you observed, the low rates are here to stay on the long run. (mostly because aging population of the developed countries as pension funds buy bonds to get the fixed cashflow they need to pay the pensions.)
> but it's not expensive _everywhere_. It's expensive in some of the most desirable places.
I disagree with this. I think this was true for the mid 00s property bubble, but now prices are exploding not just in the usual suspects like SF, LA and NYC. Pretty much every place that's not a total shithole is experiencing huge home price appreciation.
I made a post on a different thread making this point, and I used Flint, Michigan as my example of "sure, prices in Flint are still low..." only to get a response from another commenter along the lines of "You'd be surprised - while bad areas of Flint are still depressed, many of the nearby areas have also seen huge runups in real estate values."
but it's not expensive _everywhere_. It's expensive in some of the most desirable places. And housing has some issues unrelated to the market - such as NIMBYs stopping new constructions.