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Mortgage Rates Hit 5.78%, Highest Level Since 2008

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Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#11

Post by jnwatson »

fatnoah wrote: post #6
treyfitty wrote: post #4

For reference, historically, mortgage rates were greater than 6%. "Since 2008" isn't that meaningful, other than to imply "since QE regime began."

The mortgage I got (FHA) in July of 2008 was 6.25%. The house I grew up in, had a mortgage at 9%, and was only that low because my parents won a contest at the local bank.

Back in the day many mortgages were “assumable”, like taking over someone else’s car lease. That’s the only way my parents could afford to buy a home in 1981. Interest rates were above 15%.

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#12

Post by rhinoceraptor »

leekh wrote: post #2

What's going to give first? Interest rates? House Prices? I was on the market to buy a place. First time home owner jitters, but interest rates started to rise fast. Buying power dropped so much that I'm dropped out. At these rates, I really need the price to drop by 20%-ish. I'm sitting on cash and it feels like shit. I wonder how other people feel.

I think it depends on if real estate is still being devoured by investment groups. And during high inflation, it doesn't seem like they're going to stop parking their money in homes any time soon. And since they can buy with cash, interest rates don't matter to them.

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#14

Post by webinvest »

dcchambers wrote: post #3

Ironically, my local credit union dropped their 30 year fixed rate from 6.0% to 5.875% after the FED raised rates yesterday. I guess they raised them less than they were expecting?

They were higher due to uncertainty of even higher rate announcements.

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#15

Post by noobermin »

rhinoceraptor wrote: post #12
leekh wrote: post #2

What's going to give first? Interest rates? House Prices? I was on the market to buy a place. First time home owner jitters, but interest rates started to rise fast. Buying power dropped so much that I'm dropped out. At these rates, I really need the price to drop by 20%-ish. I'm sitting on cash and it feels like shit. I wonder how other people feel.

I think it depends on if real estate is still being devoured by investment groups. And during high inflation, it doesn't seem like they're going to stop parking their money in homes any time soon. And since they can buy with cash, interest rates don't matter to them.

How much influence do investment groups really have on the housing bubble?

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#16

Post by jmoak3 »

noobermin wrote: post #15
rhinoceraptor wrote: post #12

Earlier quoted context omitted.

I think it depends on if real estate is still being devoured by investment groups. And during high inflation, it doesn't seem like they're going to stop parking their money in homes any time soon. And since they can buy with cash, interest rates don't matter to them.

How much influence do investment groups really have on the housing bubble?

Something like 15% of all home sales over the past year were institutional buyers according to a report by the national association of realtors. [0]

It was more dramatic for some counties - Austin’s for example saw 41% of homes sold to institutional buyers.

As rates rise and a recession looms, time horizon before profitability shrinks and ability to pay rent falls into question, which puts these regions at risk of a crash in price as these parties may have to liquidate.

Tread lightly!

[0] https://cdn.nar.realtor/sites/default/files/documents/2022-i...

EDIT: 20% to 15%

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#17

Post by sentirist »

leekh wrote: post #2

What's going to give first? Interest rates? House Prices? I was on the market to buy a place. First time home owner jitters, but interest rates started to rise fast. Buying power dropped so much that I'm dropped out. At these rates, I really need the price to drop by 20%-ish. I'm sitting on cash and it feels like shit. I wonder how other people feel.

The FRED 30 year fixed average puts things in perspective. https://fred.stlouisfed.org/series/MORTGAGE30US

We have had a historic move up in rates but that is coming out of COVID with rates at levels that don't even make sense to lend at for 30 years with out the Fed.

It would seem hard to believe housing prices are not overvalued with that artificially low rate regime but it is also hard to see housing prices crash in a massive inflationary environment. I would think we have a small pull back and then a flat line as time catches up with price.

Of course, real estate price is always local so generalizing to the whole country doesn't mean so much.

Canada I think is more interesting than the US with all the adjustable rate mortgages. Obviously, that is not going to end well when those rates adjust as an adjustable rate mortgage is basically a bet on what is happening, not happening.

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#18

Post by FooBarBizBazz »

leekh wrote: post #2

What's going to give first? Interest rates? House Prices? I was on the market to buy a place. First time home owner jitters, but interest rates started to rise fast. Buying power dropped so much that I'm dropped out. At these rates, I really need the price to drop by 20%-ish. I'm sitting on cash and it feels like shit. I wonder how other people feel.

I feel like Mr. Biswas.

There's no winning.

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#19

Post by UncleOxidant »

leekh wrote: post #2

What's going to give first? Interest rates? House Prices? I was on the market to buy a place. First time home owner jitters, but interest rates started to rise fast. Buying power dropped so much that I'm dropped out. At these rates, I really need the price to drop by 20%-ish. I'm sitting on cash and it feels like shit. I wonder how other people feel.

Arguably the 1980-81 era is a bit of an outlier, but perhaps instructive due to some of the similarities. The Fed under Volcker caused mortgage rates to rise to close to 20%. This was done to quell inflation that had proven persistent during the 70s. Back in '08 I recall looking at home sales data for my state (Oregon) during that era and there were quarters where the average selling price went down almost 20%. Of course, that's average selling price - it doesn't necessarily translate to home prices falling 20%, volume also fell (also consider that Oregon was very timber dependent then and there was suddenly a lot less home building going on). I suspect we'll see mortgage rates this time around hit 8% which really isn't an unusual rate historically, but given current prices that kind of rate will cause disruption. Bottom line: wait for rates to go higher - prices will fall. You can refinance the mortgage after rates go back down some, but I wouldn't expect to see 3% 30 year mortgages for a long time.

Re: Mortgage Rates Hit 5.78%, Highest Level Since 2008

#20

Post by listenallyall »

frumper wrote: post #7
dcchambers wrote: post #3

Ironically, my local credit union dropped their 30 year fixed rate from 6.0% to 5.875% after the FED raised rates yesterday. I guess they raised them less than they were expecting?

Sounds like they over-raised them prior to the FED rate hike.

Love how people assume it was something nefarious. It's a damn credit union, not a bank. They likely dropped the rate because the long bond (30-year) yield actually dropped after the Fed "raised rates".
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