Letter: Interest rates will have to go up, pushing housing prices down

Send your letter to editor@oakbaynews.com

Just a thought for some readers of letters to the editor:

From 1992 to 2017 interest rates declined. During those 25 years, increasingly money could not find places that offered respectable safe returns. But, investors looked to maximize their returns . This need caused many investors to seek hard assets, assets that will be there no matter what. This need fueled the desire to own and so the purchasing of real estate. Real Estate has gone up all that time.

In history, house prices used to run at about three to five times earnings. So, if the average household income was $70,000 as it is today, the house prices were $210,000 to $ $350,000. But today, for those folks, the average house price is double to quadruple that – conservatively.

Much has been said about the reason for strong pricing and heavy demand for houses. One might consider though, that the real push is from the ridiculously low interest rates. In the USA, unemployment is at the lowest levels almost ever.

Corporations are expanding and the U.S. economy is expanding and will likely do so. This will cause higher wages due to lack of worker availability. Resultantly, inflation will increase. Interest rates will have to go up. This will ultimately push housing prices down. This push will likely be exacerbated by all the real estate speculators trying to unload.

There may be more out there than we think.

Something to have in mind.

John Bowron

Oak Bay

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