Jysin
Ahn'Qiraj Raider
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Or is it? "Low" is always relative.
Let's see mortgage rates in 3-6 months time.
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Home buying thread
- Thread starter Pasteton
- Start date
Let's see mortgage rates in 3-6 months time.
Drinsic
privileged excrementlord
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Well sure, if you're looking to buy right now, this could be the lowest we'll see for years. However, I bought my home at 3% last year, and my mortgage company is still sending me trash in the mail about refinancing.
Borzak
Bronze Baron of the Realm
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So, for a $1,000,000 house, the jump from 3% to 5% interest on a 30 year fixed is about $1600/month in extra interest ($576,000 over the course of the loan).
That's insane. This is going to have to kill the market right?
That's insane. This is going to have to kill the market right?
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TJT
Mr. Poopybutthole
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If I bought the house I am building today as opposed to Jan 2021 when I did it would be $1100 more a month with today's interest rate. Based on the loan amount differences only. As the same house today starts at $200k more than I paid for it.
Edit: Oh wait they changed it again!
Jan 2021: $380k starting price.
Apr 2022: $641k starting price.
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Now you understand what the Fed's sole job is. This is how monetary policy controls inflation. Unfortunately our Fed is worthless.
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Man what's crazy is people still put up with it, and are paying premium over market for houses at prices and interest rates they can't afford, all to show off, etc.
I've had my house for 6-7 years, yeah I want a bigger and fancier one, but I can just remodel this mother fucker and keep it at my low rate (refinanced a year or so ago) and reasonable price.
It's a battle between the insane amounts of capital that have been pumped into the economy and rising rates. You have to think the rates will start winning soon though.
About half the houses near me in the $1-2M range are selling for all cash deals. Sadly, rising rates just means they'll sell in a month or two vs 3 days, rather than declining in price.
The market that was in the 200k range in 2019 has inflated the fastest because wages for those workers have increased so fast. When that labor market cools the prices will stabilize. Unless interest rates really spike way beyond current expectations or wages start decreasing I can't see prices falling that much in good areas. Vacation areas I am more iffy on, those tend to bust the hardest in recession anyway and they could get hit with the double whammy of rising rates and decreasing demand if offices start to pull back on work from home.
Blazin
Creative Title
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Why would it hurt the market, inflation is running 8-10% that means even at 5% you are getting a mortgage with a negative real rate of (5%) which is insanity. We aren't even at positive real rates and people are thinking that these rates are even remotely a detriment. If inflation stays elevated you are printing money taking a mortgage at these rates.
If a negative real rate scares people away then how the fuck do you think people paid positive real rates for mortgages for the better part of a century?
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In fairness, with how most people live paycheck to paycheck not too many are in a position to do the math on gaming inflation over 1-2 decades. The rate goes up, real negative or otherwise, and the relationship to your paycheck becomes less favorable.
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Yeah. We are entering the cash is king timeframe. Cash buying power increases as higher rates hobble those trying to buy with mortgages.
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Blazin
Creative Title
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But that's not the situation People are in a strong position financially versus the cost of housing. This rapid gain in home prices is just playing catch up. Housing affordability is still better than just the long term average again we havent even started to get below long term trend of affordability.
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Wouldn't look at it that way since those "8-10% inflation" numbers have little correlation with housing prices. Housing prices rose for a decade when inflation was supposed to be super low. Now that real consumer inflation is high and rates are going up it seems most likely that prices are going to stagnate or drop. Its like who care about a 4% dividend if the price of the stock is going to drop 10% in the next year?
What matters is what people can afford with their current salaries. Two years ago a hypothetical house may have been $500k, and with a 3% 30-year the buyer would be paying $1690 for the monthly P+I. That was evidently what the market was saying buyers could afford at the time for that given house in that location.
Today the same house would be at least $800k - with a 5% loan the P+I is going to be $4k. Are the families that were looking at buying these places making $2500 more a month than they were before? Probably not.
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That all may be true, but if you look at the present moment before and after a rise in interest rates and with income fixed in the short term, the net effect is to reduce affordability.
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Blazin
Creative Title
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You aren't using the facts at hand, not going to argue over made up issues. Just looked up Housing Affordability Index which stands at 135.4 , long term is average is 125. Anything over 100 means on average people are able to afford the current cost of buying homes.
I know it's painful that people feeling that pressure is what causes these opinions you see here, but those feelings are not the whole picture.
There are 72 Million millennials and they want into homes, we have had a complete dearth of new home construction for a decade. Families have more money than at any point in our life times. This tight supply is not going to go away anytime soon. In fact look up me on this issue in this forum and its years of people saying "Incoming housing crash!" and me calling them silly. First it was the moratorium stopping was going to end the world, now it's the interest rates. All of these things are factors, they do indeed effect affordability and have real impact on people BUT 72 Million millennials fighting over a housing supply that isn't even treading water simply out weighs the factors people are focusing on.
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