Grace,
It isn't FED's money creation which is causing the low rates, and home appreciation is exclusively due to falling rates.
Are you sure?
Message 19059139
Housing and real estate -- This would be expected, under normal conditions, to be an area where prices respond relatively quickly and intensively to increased bank credit, the mechanism of increased money supply that is actually used. People who buy houses almost always do so through bank credit, and they will generally do so at times at which they are not demonstrating a demand for money to hold. They obviously have a demand for the house, and the supply of land and houses is often rather limited. All of these factors, money supply high, money demand to hold low, house supply low, house demand high, tend to drive the prices of houses up. In addition, houses and all other forms of goods that provide their services in an extended future, are valued higher in the present when the rate that discounts their future value back to the present is lower. This lower interest rate is exactly what results when the supply of loanable bank funds is increased.
It is clear that the prices of most houses and real estate have gone significantly higher in the recent past, largely, I am conjecturing, in response to increased bank credit, and the associated reduction in interest rates.
Regards, Don |
