Until this housing cycle and trying and failing to buy a house for a year so far, I didn’t truly appreciate how and why high interest rates slow growth. It’s not so much the cost of financial capital as the freezing of sunk non-financial capital. High interest means you can’t easily sell and rebuy elsewhere so you freeze in place. More generally you can’t redeploy existing existing capital in even equivalent ways if rivalrous good are involved, forget novel ways. Contrary to my expectations as a free agent, lining up a mortgage hasn’t been the problem. And I’m perhaps foolishly even willing to pay the interest rate and take a chance on future refinancing. But the supply-side freeze is much more real.

Interest rates coming down even dramatically is not enough. It has to reach parity with locked in interest rates to unfreeze rivalrous asset classes. I’m interested in seeing how much capital is frozen at what “temperatures” as understood via locked in interest rates.

Blogger at ribbonfarm.com, running summerofprotocols.com, host of /gloom ☀️

Just an observation What is the role of sunk non-financial capital in the housing market?