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how much do you think then that the run
00:00:03
that we've had on inflation the last
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couple years has played a role into this
00:00:07
I mean obviously there's the component
00:00:09
of the price runup we've seen in
00:00:11
properties over the last couple years as
00:00:13
well people that you know had a house
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valued at
00:00:16
$300,000 pre pandemic probably saw what
00:00:19
between 50 and $100,000 depending on the
00:00:22
size of the house Extra Value in their
00:00:24
home in just a couple of years that's
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right so that's certainly um there's
00:00:29
there's you know there been pandemic
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factors in the past that I think have
00:00:32
led to an increase in inflation I think
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going forward the challenge the policy
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challenge for for instance our monetary
00:00:38
policy makers is the idea of raising
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rates right which is why mortgage rates
00:00:43
are so high today the goal was to dampen
00:00:45
inflation y but what we just discussed
00:00:49
these are in the labor market as well as
00:00:51
in the housing market these are actually
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two factors caused by lockin that may if
00:00:55
anything be inflationary right we're not
00:00:57
putting our houses up for sale we're
00:00:59
also not buying but I think there's it
00:01:01
seems to the lack of liquidity and and
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inventory seems to generate upward price
00:01:05
pressure so house prices have remained
00:01:08
really remarkably High given that rates
00:01:09
are so high as well as yeah maybe you
00:01:12
have to compensate for instance firms
00:01:14
and and workers right to in order to
00:01:16
move maybe you have to maybe you have to
00:01:18
offer um part of the compensation
00:01:19
package you may have to entice someone
00:01:21
to pay a bit more so there's I think
00:01:23
risks around lock in where the policy
00:01:25
maker policy has raised interest rates
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but actually there may be
00:01:30
effects that are inflationary coming
00:01:32
coming through lockin what's interesting
00:01:33
right now is you know we're looking at
00:01:36
rates at around
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7% and I think people are trying to
00:01:40
figure out where that sweet spot is
00:01:43
that'll really start to drive a lot of
00:01:45
activity you know do you do you need to
00:01:46
get rates on average down closer to 6%
00:01:49
five and a half whatever that number is
00:01:52
in order to have people thinking okay
00:01:54
now I feel like that level of value
00:01:57
between the mortgage I have and the one
00:01:59
I would take is close enough where I
00:02:02
don't feel like I'm I'm putting myself
00:02:04
in a bind that's certainly true I don't
00:02:07
think there's a magic number even though
00:02:09
maybe people have these kind of
00:02:10
thresholds in mind like I'm looking I'm
00:02:12
waiting for it to hit 5% yeah what we
00:02:15
would say as Economist is basically like
00:02:16
it's very difficult to time exactly when
00:02:19
rates come down and rates they they may
00:02:21
stay higher right there that's that's
00:02:23
been a surprise in the latest inflation
00:02:24
news um and so you shouldn't you should
00:02:27
make you should make your decisions
00:02:29
based on your personal circumstances and
00:02:31
so um there's obviously um typically
00:02:34
there's an option to refinance if rates
00:02:36
come down so that's a way to if you even
00:02:39
if you had to take out a mortgage rate
00:02:40
today at higher rates you can refinance
00:02:42
down obviously there's a cost involved
00:02:44
with that and you have to make sure
00:02:45
there's no prepayment penalty so that's
00:02:46
maybe like more practical advice but you
00:02:48
should definitely not try to time the
00:02:50
market I think that's I think that's
00:02:51
very difficult to do given that yeah
00:02:53
given that we we don't see a a super
00:02:55
clear path for well and and I guess to a
00:02:57
degree the market that a person is in
00:02:59
has to factor in here as well when you
00:03:01
think about you know the value of a home
00:03:04
in Montana or Utah or North Dakota is
00:03:07
going to be a lot different most likely
00:03:09
in many cases to what you know we see
00:03:11
here in Philadelphia or New York or
00:03:13
Chicago and that to a degree I guess
00:03:16
also brings me to the question about if
00:03:18
there is kind of an incentive put
00:03:20
forward by the government to try and
00:03:23
ease this lock in is it better to have
00:03:26
it at the federal level or do you need
00:03:28
to have some combination with the state
00:03:31
and local governments coming in as well
00:03:33
because of that difference in cost and
00:03:35
value absolutely so that's that's what
00:03:37
we're hoping to tackle and new
00:03:39
researchers is try to kind of model the
00:03:41
housing market with this kind of housing
00:03:43
ladder and different types of Housing
00:03:45
and different prices in different
00:03:46
regions so you may have to really
00:03:47
finally calibrate any such intervention
00:03:50
an alternative intervention that we also
00:03:52
want to highlight and I think push push
00:03:54
promote of going forward is um there are
00:03:57
actually ways in which you can un block
00:04:00
the market through a mortgage contracts
00:04:02
so you so in some countries it is
00:04:04
actually possible to take your mortgage
00:04:06
with you when you're moving the rate
00:04:08
exactly take the rate with you take the
00:04:09
rate exactly take the mortgage and the
00:04:11
rate with you and the friction right now
00:04:13
in the US is that basically you as the
00:04:15
you as the Bor you could you would
00:04:16
ideally want to go to your bank and
00:04:18
maybe renegotiate and ask them for you
00:04:20
to Port the mortgage or maybe take some
00:04:22
part of the rate uh keep some of that
00:04:24
with you when you're as you're moving
00:04:26
and but that's typically not possible
00:04:27
because um mortgages are securitized has
00:04:29
and sold to mortgage backed Securities
00:04:31
investors and so you typically end up
00:04:33
negotiating with the mortgage servicer
00:04:35
and there's been you know some some
00:04:37
evidence following the financial crisis
00:04:39
and and some um kind of case studies
00:04:41
these days of how difficult is it they
00:04:43
typically don't have the write
00:04:44
incentives to renegotiate with you
00:04:46
there's not that much in it for them
00:04:48
right and so I think if the government
00:04:49
were to step in it could certainly um
00:04:51
incentivize maybe provide um some
00:04:53
benefits uh in terms of allowing
00:04:55
services to renegotiate thank you for
00:04:57
listening to the ripple effect we hope
00:04:59
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00:05:00
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00:05:03
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from the Wen School
