: 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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The housing market is a market, so all the forces of supply and demand apply.
It is such a huge market with much inelastic demand (everyone needs housing) that it is fairly unique. Also, unlike some countries which restrict what can buy housing, in the West it is perfectly legal for big corporations or investment firms to buy up much housing and land if they think they’ll get a return on investment. Low interest rates and policies like quantitative easing effectively created a lot of money from scratch which pushed up the housing market to current levels.
Interest rates are set considering the entire economy, but certainly with consideration that no one wants the housing market to completely crash. The effect of higher interest rates already caused a few banks to effectively go bankrupt as it made some old bond investments worthless. I can’t answer about hope, but I’d agree there’s some precariousness now considering inflation and supply issues.
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