: How does the housing market work? What will it take for the interest rates to drop? Is there any hope in sight?
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People want houses, driving up prices. Population increases (births or immigration) raise prices.
People build houses. There’s a whole tangled mess of zoning, incentives, bribery, NIMBY, and I-got-mine politics. But more houses drive down prices.
Most people can’t pay cash for a house so they get a loan, called a mortgage. If you can’t pay this loan, they take the house so banks are more willing to lend money for something when it is it’s own collateral.
Banks set mortgage rates based on the rate they themselves can get a loan and how much they trust you with a loan.
The loan rate that banks get is set by the big bank called the Federal reserve (or other similar central banks in various nations). The Federal Reserve is in charge of keeping the value of money steadily and slowly inflating. They printed like mad when covid hit, and eased back when things started back up, and didn’t get it exactly right. Which is understandable, covid as a mess with a lot of unknowns. But since they missed the target, money inflated more than they wanted and the way they fix that is increasing the loan rate they give to banks.
Mortgage interest rates only tangentially relate to housing costs, and it’s all a feedback system affecting everything else. Lower rates mean more buyers means more demand means higher prices.
>Is there any hope in sight?
Yes. [It looks like it peaked in July ’22 and is now down to ~3%.](https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/) Which is about where they want it. So yeah, they’ll ease back rates as low as the economy will afford. You know, “soon”.
But if you want to afford a house, rather than pleading with the Fed you should probably ask your representative to outlaw people treating houses like hotels. Even if rates go low and everywhere magically gets affordable, they’ll all be bought by big businesses or rich dicks and turned into Air BnBs or rental properties.
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