Summary
Akhil Patel examines historical US house price behavior during prior Federal Reserve rate hiking cycles, providing data to counter fears that rising rates in 2022 will crash the real estate market. The analysis shows house prices have historically held up well or continued rising during Fed tightening cycles.
Key Claims
- Historical data: US house prices performed well or continued rising during prior Fed rate hike cycles
- Prior rate hike cycles reviewed: 2017–18 (1.75%), 2005 (1.5%), 2004 H2 (1%), 1986–89 (4%), 1994 (2.75%), 1978 (1.75%)
- Rising mortgage costs tend to drive borrowers to rental market, pushing rents higher and eventually capitalizing into higher house prices
- In periods where inflation exceeds interest rates, the rational response is to buy assets — houses and farmland
- Negative real interest rates (rates below inflation) are historically bullish for asset prices