Do home prices go down during a stagflation?

[Anonymous]

Do home prices go down during a stagflation?

[Anonymous]

No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

[Anonymous]

Anonymous wrote:No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

+1. This.

In my humble opinion, by January 2026 if inflation is on the rise and unemployment on the rise as well, we will see how it affects the real estate market.

This Fall 2026 market will be normal, but Spring 2026 may not be so normal.

Now of course real estate is local. Some the DMV fans with their favourite neighborhoods will argue that their market will never change no matter what. We will see.

[Anonymous]

Anonymous wrote:No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

Nominal prices may remain the same but real value will be going down.

Often people feel better to see at 500K after 3 years than sell at 480K now, but it's not a good outcome during stagflation at all.

[Anonymous]

Anonymous wrote:No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

This is a bit misleading. Correct about potentially plateauing in nominal price, so as an investment vehicle housing may underperform other asset classes, but housing is first and foremost shelter. Whether prices fall or rise is more a function of supply and demand. While supply is increasing in many markets, it's still low by historical standards in part because of the lock-in effect of under 4% interest rates that people are loathe to give up, and insufficient building in the years after the 2008 financial crisis.

On the demand side, historically high prices coupled with higher (albeit in line with historical norms) interest rates has dampened demand. Mortgage interest rates are driven by rates on Treasuries, not the prime rate which the Fed sets. Demand for US debt (Treasuries) is down, which has pushed Treasury rates up.

Now, how all this combines in a stagflation scenario depends on which part the Fed is more concerned with: the stagnant growth or the inflation because the monetary policy prescriptions are diametrically opposed. If the Fed decides to lower interest rates through quantitative easing (buying US treasuries) mortgage rates could go down. I wouldn't bet on it though because US national debt is at an all time high. We're in for a rough ride a la the late 70s early 80s which truly sucked.

One final point. Inflation is sector specific, and services inflation has outpaced commodities and hard goods inflation for decades. Services inflation really only responds to increased supply (more competition) and it often takes longer to see the effects.

[Anonymous]

Nope. Interest rates will likely go up tho!

[Anonymous]

Going to have the same attitude about plateauing prices as I do about rising prices: I don't plan to sell our house for 10 or 15 years, so I'm not going to worry about it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

This is a bit misleading. Correct about potentially plateauing in nominal price, so as an investment vehicle housing may underperform other asset classes, but housing is first and foremost shelter. Whether prices fall or rise is more a function of supply and demand. While supply is increasing in many markets, it's still low by historical standards in part because of the lock-in effect of under 4% interest rates that people are loathe to give up, and insufficient building in the years after the 2008 financial crisis.

On the demand side, historically high prices coupled with higher (albeit in line with historical norms) interest rates has dampened demand. Mortgage interest rates are driven by rates on Treasuries, not the prime rate which the Fed sets. Demand for US debt (Treasuries) is down, which has pushed Treasury rates up.

Now, how all this combines in a stagflation scenario depends on which part the Fed is more concerned with: the stagnant growth or the inflation because the monetary policy prescriptions are diametrically opposed. If the Fed decides to lower interest rates through quantitative easing (buying US treasuries) mortgage rates could go down. I wouldn't bet on it though because US national debt is at an all time high. We're in for a rough ride a la the late 70s early 80s which truly sucked.

One final point. Inflation is sector specific, and services inflation has outpaced commodities and hard goods inflation for decades. Services inflation really only responds to increased supply (more competition) and it often takes longer to see the effects.

This. I really wish our citizens understood and accepted this. It will prevent many from buying too much housing and sinking in capital that could be generating better profit elsewhere.

Folks buy the cheapest smallest house for your family in the best and safest neighborhood you can find.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

This is a bit misleading. Correct about potentially plateauing in nominal price, so as an investment vehicle housing may underperform other asset classes, but housing is first and foremost shelter. Whether prices fall or rise is more a function of supply and demand. While supply is increasing in many markets, it's still low by historical standards in part because of the lock-in effect of under 4% interest rates that people are loathe to give up, and insufficient building in the years after the 2008 financial crisis.

On the demand side, historically high prices coupled with higher (albeit in line with historical norms) interest rates has dampened demand. Mortgage interest rates are driven by rates on Treasuries, not the prime rate which the Fed sets. Demand for US debt (Treasuries) is down, which has pushed Treasury rates up.

Now, how all this combines in a stagflation scenario depends on which part the Fed is more concerned with: the stagnant growth or the inflation because the monetary policy prescriptions are diametrically opposed. If the Fed decides to lower interest rates through quantitative easing (buying US treasuries) mortgage rates could go down. I wouldn't bet on it though because US national debt is at an all time high. We're in for a rough ride a la the late 70s early 80s which truly sucked.

One final point. Inflation is sector specific, and services inflation has outpaced commodities and hard goods inflation for decades. Services inflation really only responds to increased supply (more competition) and it often takes longer to see the effects.

This. I really wish our citizens understood and accepted this. It will prevent many from buying too much housing and sinking in capital that could be generating better profit elsewhere.

Folks buy the cheapest smallest house for your family in the best and safest neighborhood you can find.

Why should I want my shelter, the place I spend a huge amount of time, to be the cheapest and smallest I can get away with?
I don't think most people buy houses as investments: they buy them as places they want to spend time. They only think of them as investments when it's time to sell.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No, they tend to plateau in nominal price and lose real value due to inflation. Repairs, maintenance, insurance all go up in price. So you’re paying more to maintain a real asset that is generally eroding in real value.

This is a bit misleading. Correct about potentially plateauing in nominal price, so as an investment vehicle housing may underperform other asset classes, but housing is first and foremost shelter. Whether prices fall or rise is more a function of supply and demand. While supply is increasing in many markets, it's still low by historical standards in part because of the lock-in effect of under 4% interest rates that people are loathe to give up, and insufficient building in the years after the 2008 financial crisis.

On the demand side, historically high prices coupled with higher (albeit in line with historical norms) interest rates has dampened demand. Mortgage interest rates are driven by rates on Treasuries, not the prime rate which the Fed sets. Demand for US debt (Treasuries) is down, which has pushed Treasury rates up.

Now, how all this combines in a stagflation scenario depends on which part the Fed is more concerned with: the stagnant growth or the inflation because the monetary policy prescriptions are diametrically opposed. If the Fed decides to lower interest rates through quantitative easing (buying US treasuries) mortgage rates could go down. I wouldn't bet on it though because US national debt is at an all time high. We're in for a rough ride a la the late 70s early 80s which truly sucked.

One final point. Inflation is sector specific, and services inflation has outpaced commodities and hard goods inflation for decades. Services inflation really only responds to increased supply (more competition) and it often takes longer to see the effects.

This. I really wish our citizens understood and accepted this. It will prevent many from buying too much housing and sinking in capital that could be generating better profit elsewhere.

Folks buy the cheapest smallest house for your family in the best and safest neighborhood you can find.

Why should I want my shelter, the place I spend a huge amount of time, to be the cheapest and smallest I can get away with?
I don't think most people buy houses as investments: they buy them as places they want to spend time. They only think of them as investments when it's time to sell.

Because a smaller house is cheaper in most places. The idea is not to waste money on too much housing..this may not apply to you if you are one of the typical highly paid people on this forum. But for the most majority of people less housing is better.

[Anonymous]

During 1970's stagflation home prices rose very quickly in this area. But that may have been because of factors unique to DMV.

[Anonymous]

My parents sold their starter townhome in Gaithersburg after 5 years in 70s stagflation for a big profit that allowed them to buy a SFH in a more desirable town.

[Anonymous]

Anonymous wrote:My parents sold their starter townhome in Gaithersburg after 5 years in 70s stagflation for a big profit that allowed them to buy a SFH in a more desirable town.

Cool.

[Anonymous]

Why are people saying that housings value will go down? I get that maintenance will go up, but property taxes will be deductible again, which will make people able to afford more yourself and drive up prices, and lower interest rates also drive up demand and prices.

No matter what ultra low rates are not coming back, so I don’t see the shortage abating anytime soon.