The fed ruined the housing market with their Covid response. They dropped rates to near zero with absolutely no strings attached which let everyone with money maximize their leverage and buy all the housing as investments and drive up prices. The low rates should have been reserved for first time home buyers. Instead, investors went crazy and regular families got screwed with higher prices, and then later, higher rates and higher prices. Unless you bought during the 3 months during 2020 before everything exploded, or owned already and got to refi during Covid, everyone else got screwed.
The US should have looked to Australia as an example of why not to do that. We had very low interest rates pre-covid in a bid to try and drive inflation up to about 2.5%. It didn’t work because it basically meant that people who had plenty of cash just put that into investment properties and drove house prices through the roof, instead of increasing spending throughout the economy like the reserve bank thought it would. That led to a vicious cycle of property investors using the low rates to continue investing in properties, continuing to drive house prices up and pricing new home owners out of the market.
Then, when the post-covid inflation hit, the reserve bank decided to increase interest rates because if the interest rate drops didn’t have an effect on inflation, it should have an effect on inflation in the other direction right? (/s) This meant that the few first home buyers actually got their foot in the door pre-covid were the ones who got punished the most, and the rest of us dealt with the “supply chain issues” (rampant profiteering).
The fed ruined the housing market with their Covid response. They dropped rates to near zero with absolutely no strings attached which let everyone with money maximize their leverage and buy all the housing as investments and drive up prices. The low rates should have been reserved for first time home buyers. Instead, investors went crazy and regular families got screwed with higher prices, and then later, higher rates and higher prices. Unless you bought during the 3 months during 2020 before everything exploded, or owned already and got to refi during Covid, everyone else got screwed.
The US should have looked to Australia as an example of why not to do that. We had very low interest rates pre-covid in a bid to try and drive inflation up to about 2.5%. It didn’t work because it basically meant that people who had plenty of cash just put that into investment properties and drove house prices through the roof, instead of increasing spending throughout the economy like the reserve bank thought it would. That led to a vicious cycle of property investors using the low rates to continue investing in properties, continuing to drive house prices up and pricing new home owners out of the market.
Then, when the post-covid inflation hit, the reserve bank decided to increase interest rates because if the interest rate drops didn’t have an effect on inflation, it should have an effect on inflation in the other direction right? (/s) This meant that the few first home buyers actually got their foot in the door pre-covid were the ones who got punished the most, and the rest of us dealt with the “supply chain issues” (rampant profiteering).