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how much do you think then that the run that we've had on inflation the last
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couple years has played a role into this I mean obviously there's the component
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of the price runup we've seen in properties over the last couple years as well people that you know had a house
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valued at $300,000 pre pandemic probably saw what between 50 and $100,000 depending on the
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size of the house Extra Value in their home in just a couple of years that's
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right so that's certainly um there's there's you know there been pandemic
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factors in the past that I think have led to an increase in inflation I think going forward the challenge the policy
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challenge for for instance our monetary policy makers is the idea of raising rates right which is why mortgage rates
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are so high today the goal was to dampen inflation y but what we just discussed these are in the labor market as well as
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in the housing market these are actually two factors caused by lockin that may if
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anything be inflationary right we're not putting our houses up for sale we're
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also not buying but I think there's it seems to the lack of liquidity and and
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inventory seems to generate upward price pressure so house prices have remained really remarkably High given that rates
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are so high as well as yeah maybe you have to compensate for instance firms and and workers right to in order to
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move maybe you have to maybe you have to offer um part of the compensation package you may have to entice someone
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to pay a bit more so there's I think risks around lock in where the policy maker policy has raised interest rates
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but actually there may be effects that are inflationary coming coming through lockin what's interesting
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right now is you know we're looking at rates at around 7% and I think people are trying to
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figure out where that sweet spot is that'll really start to drive a lot of activity you know do you do you need to
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get rates on average down closer to 6% five and a half whatever that number is in order to have people thinking okay
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now I feel like that level of value between the mortgage I have and the one I would take is close enough where I
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don't feel like I'm I'm putting myself in a bind that's certainly true I don't
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think there's a magic number even though maybe people have these kind of thresholds in mind like I'm looking I'm
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waiting for it to hit 5% yeah what we would say as Economist is basically like it's very difficult to time exactly when
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rates come down and rates they they may stay higher right there that's that's
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been a surprise in the latest inflation news um and so you shouldn't you should
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make you should make your decisions based on your personal circumstances and so um there's obviously um typically
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there's an option to refinance if rates come down so that's a way to if you even
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if you had to take out a mortgage rate today at higher rates you can refinance down obviously there's a cost involved
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with that and you have to make sure there's no prepayment penalty so that's
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maybe like more practical advice but you should definitely not try to time the market I think that's I think that's
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very difficult to do given that yeah given that we we don't see a a super clear path for well and and I guess to a
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degree the market that a person is in has to factor in here as well when you think about you know the value of a home
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in Montana or Utah or North Dakota is going to be a lot different most likely in many cases to what you know we see
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here in Philadelphia or New York or Chicago and that to a degree I guess also brings me to the question about if
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there is kind of an incentive put forward by the government to try and ease this lock in is it better to have
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it at the federal level or do you need to have some combination with the state and local governments coming in as well
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because of that difference in cost and value absolutely so that's that's what
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we're hoping to tackle and new researchers is try to kind of model the housing market with this kind of housing
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ladder and different types of Housing and different prices in different regions so you may have to really
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finally calibrate any such intervention an alternative intervention that we also
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want to highlight and I think push push promote of going forward is um there are
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actually ways in which you can un block the market through a mortgage contracts so you so in some countries it is
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actually possible to take your mortgage with you when you're moving the rate
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exactly take the rate with you take the rate exactly take the mortgage and the rate with you and the friction right now
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in the US is that basically you as the you as the Bor you could you would ideally want to go to your bank and
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maybe renegotiate and ask them for you to Port the mortgage or maybe take some part of the rate uh keep some of that
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with you when you're as you're moving and but that's typically not possible
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because um mortgages are securitized has and sold to mortgage backed Securities investors and so you typically end up
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negotiating with the mortgage servicer and there's been you know some some evidence following the financial crisis
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and and some um kind of case studies these days of how difficult is it they typically don't have the write
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incentives to renegotiate with you there's not that much in it for them right and so I think if the government
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were to step in it could certainly um incentivize maybe provide um some benefits uh in terms of allowing
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services to renegotiate thank you for listening to the ripple effect we hope you found this episode informative and
00:05:00
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00:05:07
from the Wen School