Yes this exactly! The price of borrowing is a huge burden on new construction, because construction is all debt-financed.
This is one of the many reasons why just increasing the funds rate will not cure inflation. Not when it’s being driven by housing. Increasing the funds rate decreases new housing construction!
Yes this exactly! The price of borrowing is a huge burden on new construction, because construction is all debt-financed.
This is one of the many reasons why just increasing the funds rate will not cure inflation. Not when it’s being driven by housing. Increasing the funds rate decreases new housing construction!