Reply to Bidding war seems haul to the end and interest rates are dropping

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Macroeconomist here. The economy is recovering. So both interest rates and house prices are likely to be higher next year.

Just fyi, the negative relationship between interest rates and house prices holds ONLY if everything else (e.g. income growth) is constant. In this case, higher income growth is likely to drive up both variables.

Hope this helps. [/quote]

As a macroeconomist, haven't you noticed that the trend has been that even though the economy is recovering, it hasn't translated into higher income or significant job growth.  So I don't see significant income growth in the near future, especially not in the DC area, where a lot of the jobs are connected to government.  All feds are looking at modest, if any, salary increases.  We're still dealing with furloughs, and I don't see sequester going away.

I'm not saying that prices will plunge with higher interest rates, but I think because income growth is stagnant in this region, and likely will continue to be, even with an improving economy, I don't think house prices are going to continue to go up as significantly as they have been.

That's my prediction.  But I think the last decade has shown us not to trust predictions.  It's only a handful of economists that predicted what happened in 2008.  The rest pooh-poohed them.[/quote]

My income has increased every year by 10% including this summer (fed IT contractor at 180K) Besides government employees the private sector is doing fine.[/quote]

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