So what will happen with house prices and construction costs and the interest rates and the housing market?
One of the guys that understands this better than most is Jeff Booth and he has described it in his 2020 book The Price of Tomorrow. Where he states that technology drives the price down to the “marginal cost of production” (how much does it cost to produce extra once you have your startup costs covered). But we are not seeing lowering prices because of inflation (caused by easy money and printing/counterfeiting more money).
No one knows when the printing will stop, or who/where will go through a depression, or a boom or a bust, or where/who will have to deal with war, hyper inflation. But there are economic/people forces that are powerful forces…
- Technology forces the price to the marginal cost of production
- Supply and demand affect the price
- The higher the price, drives down the number of willing buyers
- Centralized fiat money systems always steal from those who use it
So back to what will happen with house prices and construction costs and the interest rate? this is all just economics and people theory. Since rates have gone up from 2.5% in 2/2022 to 6.0% 5/2023 (and higher in other loan types), many folks have decided to stand on the sidelines and not get the loan at the higher rate but waiting for it to come down. So the volume of loans taken has declined significantly. As the demand/supply ratio decreases, prices will decrease, but they can only decrease so much because the money has already been printed and the value of the US dollar has been taken (and it cannot be undone, except through the deflation of technology).
The demand for new homes or buying someone’s used home is like an onion that has many rings and all the buyers and potential buyers are all ready for a new/used home at different levels of prices. The demand for new homes was highly stimulated by the 2.5% easy money rates, and now at 6.0% there are many folks that want to buy a new/used home but not at the current rate/price. So they are “sitting on the sidelines” waiting for price of material, labor, borrowing comes down.
Bottom line … prices will come down some as the supply softens but they will only go down to the point of the printing inflation / technology deflation drives it to the marginal cost of production.
Things that are not true but at times can appear to be true …
- Homes go up in value
- My money is save in the bank
- Things get more expensive
- God is not aware of what is going on
- God does not care what is going on
What should you do …
- Remember that the borrower is servant to the lender
- When making home purchase decisions, look way down the road, like when you are 70 & 80 & 100 years old.
- Save 10% of your earnings each
- Look for decentralized hard money to store value
- Remember we are not citizens of this world forever and there is another future world that awaits
- Become more self sufficient, you never know what will not be available to you or at what price it will be available
- Have a plan A & B and maybe plan C
- Don’t put all your eggs into one basket
- Build your network of friends and trusted people
- Plant a garden, the kind that is regenerative restorative. God designed nature to be enjoyed and have a harvest.
- Stop listening to government (USDA) & advertisers & pharmacy doctors as to what is healthy, they are lying to you for a reason. Take care of your body, it is the only one you will get.