91–100 of 178 posts
Earlier quoted context omitted.
Minor correction, but you probably mean Blackrock-type firms. Blackwater was a private military company.
This is such a common confusion, someone made a handy diagram for telling apart the firms comprising the cross product of {"Black", "Bridge"} x {"rock", "water", "stone"}. https://i.redd.it/x0jeiofl7j471.jpg
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> I have no idea who is buying houses at these prices Only the most richest parts of the US have homes that start at $1m. And only a fraction of the people rich enough to live there can afford to purchase.
A lot of the time these are not bootstrapped buyers, but families with help from parents/inheritances etc. That's what you're up against.
It is the only way to go for attaining (or worse, preserving) middle-class status.
I have been wanting to ladder up to a bigger house for a few years now. For a US$1M house, which is the going rate near my area, the jump from 6% to 7% is $5000/month apr interest to $5834/month apr (not including fees, taxes, and insurance). So to go back to the monthly of $5000 (which is out of my budget), a US$1M house would need to fall to $857,153. That is NOT happening around here. I have no idea who is buying…
I have been wanting to ladder up to a bigger house for a few years now. For a US$1M house, which is the going rate near my area, the jump from 6% to 7% is $5000/month apr interest to $5834/month apr (not including fees, taxes, and insurance). So to go back to the monthly of $5000 (which is out of my budget), a US$1M house would need to fall to $857,153. That is NOT happening around here. I have no idea who is buying…
I make a 90th percentile income, and I cannot afford the median (or mean) US home price. Something is seriously wrong.
Once done, it gets easier.
Of course, that is easier said than done, but it took me 10 years to save up for that first-time 20% down payment.
I too was a 90% percentile. And it also … afterward … took several homes upward before I can tap out for a bigger down payment for a 3,200 sq. ft. in “cushy” California while attaining just 25% of take-home pay toward mortgage+insurance.
First home was a killer 48% of take-home pay toward house payment.
Yes rates were 16% in 1980 but the median home was $64,000. That's $230,000 in today's dollars.
If you'd prefer to pick a time when rates were more comparable, how about 2001 at 7%. The median home price was $180,000. $301,000 in today's dollars.
Today's median home is selling for $440,000. It's small wonder that people are upset.
[1]: https://fred.stlouisfed.org/series/MORTGAGE30US [2]: https://fred.stlouisfed.org/series/MSPUS
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Why root for the downfall of Redfin and the like? They were finally a lower cost alternative to the stranglehold that RE agents have had on sellers for decades. Why should it cost 6% to sell a house?
I think what the parent commenter is referring to is Redfin’s (along with Zillow and others) practice of buying homes and flipping them. I thought they stopped that a while ago when they saw where the market was headed though.
This is last week's data, Mortgage News Daily has the 30 year at 7.08% today. -- https://www.mortgagenewsdaily.com/mortgage-rates
https://www.bankrate.com/mortgages/mortgage-rates/
Zillow is saying 6.54% (actually down 6 basis points, though still up 39bps from last week). Zillow does break things down into categories more with Jumbo loans having a lower than average rate at 6.36% while FHA loans are at 7.05%.
https://www.zillow.com/mortgage-rates/
It's hard to estimate what the average loan rate is (or really anything in the real world where you don't have complete data). What's the average price of a gallon of milk in your city? I mean, it sounds like a simple question, but quickly becomes complicated. There are 5 supermarkets in my city. Do I just look at the price at each of them and take the mean? Do I weight the prices based on which supermarkets are more popular? Do I only take the lowest price of a gallon of milk at the supermarket or do I average in the prices of brand-name and specialty milk? Should I also include milk prices from bodegas in my average? Should I include the milk price from Instacart where they're adding their own markup?
With the average mortgage rates, is this the average rate for mortgages with zero points or the average rate that buyers are getting with some deciding to pay points? For those who don't know what points are: you sometimes have the option to pay an upfront fee for a lower rate. Each point is 1% of the loan value. If your loan is for $1M and you pay 2 points, you're paying $20,000 upfront to get a lower rate.
For example, when I look at mortgage rates on BofA's website (https://www.bankofamerica.com/mortgage/mortgage-rates/) for a $500k home with 20% down ($400k loan), they pop up 6.625% (6.787% APR) with 0.865 points which would be an upfront cost of $3,460. Their calculator doesn't say how much the rate would be worse without points, but maybe they do if you're actually applying for a loan (or maybe they don't give you a choice).
Beyond points, there's so much difficulty in knowing what average rates are. Do you look at each lender and just average the rates or do you weigh rates from BofA higher because they're writing a lot more loans than smaller lenders? Do you even really know?
Also, since you posted (and since I started writing this comment), Mortgage News Daily has adjusted their estimate down to 6.82%.
I think one thing we can certainly say is that mortgage rates have been pushed quite high and the average is likely in the 6.5%-7% range at the moment. Yes, that is a reasonably broad range, but it's certainly a contrast from the sub-4% and even sub-3% rates we had seen.
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How are these firms able to buy at such low rates? I thought these loans were reserved for owner-occupied homes.
They don't need to use mortgage financing, they can borrow the money through other methods. One consequence of Fed Reserve rate setting in combination with a regulated mortgage market is that private equity firms can borrow at lower rates than individual borrowers. I wouldn't be surprised to learn that this dynamic has been a major contributor to housing prices rising so quickly.
People with adjustable or variable rate mortgages are probably full of regret right now.
https://www.reuters.com/article/canada-banks-mortgage-rates-...
People are bringing up that past rates were higher but leaving out how much lower past prices were. Have a look at rates over time[1] vs median home price[2]. Yes rates were 16% in 1980 but the median home was $64,000. That's $230,000 in today's dollars. If you'd prefer to pick a time when rates were more comparable, how about 2001 at 7%. The median home price was $180,000. $301,000 in today's dollars. Today's median…
(of course, in practice, once they've bought, people tend to be averse to their "investment" losing 20% or 30%, even if they did lock in a good interest rate they'll be paying for years to make up the fall. this has always been one of the giant gotchas with keeping interest rates so eternally low... also the cost of financing the national debt just zoomed up too.)