Higher rates will bring prices down. Prices can only support what incomes can support at current cost of money, wages + mortgage [based on qualified mortgage underwriting guidelines] = prices. Asset prices are inversely correlated with interest rates. ~4M real estate transactions occur per year, sales will happen because of moves, death, divorce, etc. This sets the price direction momentum and comparables at these money costs.
("Note the trend. Just as the Fed drains M2 with quantitative tightening, time is needed to drain inflated residential real estate equity, grounded in mortgage rates (priced off of treasuries) and what wages can support.") (me, 7 months ago)
Tangentially related to how private equity is in a very unfavorable position at current valuations and continues to extend and pretend as long as possible before having to mark to current valuations and attempt to refinance debt loads at current money costs.
- “PE has a glut of 32,000 companies ($4T in equity) they can't sell and the average hold time is extended past 8 years.”
In hindsight, root cause analysis, it was not a good idea for the Fed to provide unlimited support to mortgage backed securities bonds during the pandemic. All of that money flowed from the bond market into unsustainable real estate equity valuations that are now readjusting to reality through time and transactions. Alas, we win or we learn.
- Home prices are losing momentum. The median U.S. home-sale price rose just 0.5% year over year, the slowest growth rate since March. The median asking price fell 0.3% year over year, its first decline since March. Some relief could be on the horizon for buyers.
- Mortgage rates are still a vital stat for homebuyers and sellers. The weekly average mortgage rate hit a 3-year high of 7.4% on October 8. Daily average rates have eased slightly in recent days, dipping to 7.45% on October 14 from 7.61% about a week earlier.
- The typical homebuyer’s monthly payment is $2,777, the highest level on record except the previous week. That’s due to high mortgage rates and still-increasing home prices.
- Homebuying demand remains near record low. Pending home sales ticked up 1.5% from a week earlier–perhaps thanks to rates easing ever-so-slightly–but were still near their lowest level in records dating back to 2021. That includes the end of 2023, when mortgage rates were nearing 8%. Pending sales declined year over year in all 50 of the most populous U.S. metro areas.
- Price drops are at a record high. As sellers come to terms with prices losing steam, more of them are dropping their prices: 22% of home sellers with active listings cut their asking price, up from 20.9% a year earlier and the highest level in our records. [My note: draw attention here]
Sellers who want to (or must) sell now will lower their prices. Sellers who don't will wait, and encounter lower price levels as mortgage rates continue to rise in step with the 10Y. As long as structural demographics ensure a strong labor market (which they will), interest rates will continue to rise both from the Fed raising short term rates and from a capital shortage pushing up longer rates. Forward debt price curve up is real estate price curve down, very simply.
Home Prices Are Starting to Fall in Some Pockets of the U.S. - https://news.ycombinator.com/item?id=50203248 - October 2026
Stubborn Sellers Are the Last Thing Propping Up Home Prices - https://news.ycombinator.com/item?id=50096330 - October 2026
https://news.ycombinator.com/item?id=50203261
("Note the trend. Just as the Fed drains M2 with quantitative tightening, time is needed to drain inflated residential real estate equity, grounded in mortgage rates (priced off of treasuries) and what wages can support.") (me, 7 months ago)
https://news.ycombinator.com/item?id=47596362
Tangentially related to how private equity is in a very unfavorable position at current valuations and continues to extend and pretend as long as possible before having to mark to current valuations and attempt to refinance debt loads at current money costs.
A $300B 'Debt Wall' Is Looming over Private-Equity Backed Companies - https://news.ycombinator.com/item?id=50260526 - October 2026
https://news.ycombinator.com/item?id=50262716
- “PE has a glut of 32,000 companies ($4T in equity) they can't sell and the average hold time is extended past 8 years.”
In hindsight, root cause analysis, it was not a good idea for the Fed to provide unlimited support to mortgage backed securities bonds during the pandemic. All of that money flowed from the bond market into unsustainable real estate equity valuations that are now readjusting to reality through time and transactions. Alas, we win or we learn.