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U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

reuters.com

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Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#141

Post by tempsy »

sytelus wrote: post #122
aschearer wrote: post #95

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…

Economists need to figure out how people are buying these expensive houses. I work in big tech and probably in 1-2% and I am still priced out of market even outside of CA. How do other people not in big tech do it? My guess is that most people buying houses are double-income families which wasn't the case in 1980s. Note to self: If you want Ameican dream, make sure you marry someone who makes as good income as you :)…

I guess it depends on your standards but to say you’re priced out everywhere with no context is a wild exaggeration if you’re in the top 5% of earners.

a $1M house or condo bought at 3% rates would have been under $5k all in a month. I’m fairly certain a single person with mid six figure income could easily afford that. It’s now around $6k which should also be doable.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#142

Post by gizmo686 »

paulmd wrote: post #100
aschearer wrote: post #95

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…

Yeah, people price housing in terms of the monthly payment, not the dollar amount so much... higher interest rates mean people can afford less principal. And mortgage rates have doubled in less than a year. (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…

> 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 is not entirely irrational. The median length of hone ownership is about 13 years. With stable value and interest rates, this is not a big issue. People can role their equity into their next home and just pay the transaction cost of selling. With rising rates and falling prices, you would also need to realize the loss, and give up on the counteracting benefit of a low rate.

The net effect of this is to make people more reluctant to move than they otherwise would be.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#143

Post by mrep »

paulmd wrote: post #132
sytelus wrote: post #118

Earlier quoted context omitted.

I don't think you should ever buy home all-cash. That would be financially stupid move. Even at 6% rates, you can get far better return on your capital on long term basis (>15 yrs). Additionally, you can always refinance later whenever rates goes down. So, paying all-cash for a house is losing a lot of ROI on your capital and is plain stupid.

There is a lot of diligence and headaches when you are involving the bank's money. Sellers like cash offers and it's at least a tiebreaker factor when you have two equal offers, in fact many sellers will prefer an all-cash offer even if it's a bit less in the end (small buyers are gonna wanna quibble about another couple grand for property defects too). Yes, it's perfectly sensible to use the bank's money when it's a…

You don't even need to do that, just make an all cash offer and set the closing date like 30-45 days out and you can finance it from the get go. You just need that extra closing time to get the financing ironed out and then you can still pay for a home with a mortgage even if you made an all cash offer. That is what I did with a place back in March.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#144

Post by colinmhayes »

ramesh31 wrote: post #76
adamredwoods wrote: post #20

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.

90th percentile US individual income is 130k. Median house is around 440. You can afford a 440k house on 130k income, even if you have a small amount of other debt.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#145

Post by mrep »

Sohcahtoa82 wrote: post #131
theandrewbailey wrote: post #21

People with adjustable or variable rate mortgages are probably full of regret right now.

Someone explain to me why someone would ever get an ARM unless you were planning on selling the house before it adjusted, because it just seems like an invitation to get fucked.

I got a 10 year ARM back in march as it was 1.125% lower than a 30 year fixed. If I cannot get a good refinance in the first 7 years, I'll just focus on paying it off fully in the next 3. Worse comes to worse, I'm like 95% certain it will be worth at least what I paid for it in 10 years if I did need to sell it for any reason so I'm not worried at all.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#146

Post by colinmhayes »

jeffbee wrote: post #12
Alupis wrote: post #8

Earlier quoted context omitted.

> a few points of interest are not going to dissuade my decision Perhaps not, but if you run the math you'll see a "few points" very quickly means you'll have to buy much less house than you may have desired.

Er, either that or the seller is going to get a much lower price than they desired. In reality, a linear solution of these two conflicting desires.

Or the housing market liquidity will collapse as all the would be sellers sit on their house while they wait for rates to go back down.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#147

Post by ramesh31 »

colinmhayes wrote: post #144
ramesh31 wrote: post #76

Earlier quoted context omitted.

I make a 90th percentile income, and I cannot afford the median (or mean) US home price. Something is seriously wrong.

90th percentile US individual income is 130k. Median house is around 440. You can afford a 440k house on 130k income, even if you have a small amount of other debt.

>Median house is around 440. You can afford a 440k house on 130k income, even if you have a small amount of other debt.

That's a $3500 monthly housing payment with taxes, PMI, insurance, and 5% down.

I bring home $7k net/month. So that would be a 50% monthly housing payment for a 90th percentile income to purchase a median priced home. And that's even if I had the $30-40k cash in the first place to close on the loan, which is impossible to save due to rent, healthcare, transportation, and food costs going through the roof.

I seriously have no idea how people are even surviving on 50/60/70k salaries at this point.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#148

Post by gizmo686 »

potatolicious wrote: post #73
powvans wrote: post #56

Earlier quoted context omitted.

I think it's a confluence of a few things... 1) You lock your mortgage rate for 90 days, so 90 days ago rates were significantly lower. These will be rolling off soon and by early next year the prevailing rates will obviously be much higher. 2) People are paying points up front to buy down the interest rate. 3) Jumbo mortgages are still much cheaper than conforming (I think a full point).

Some other key things: 4) Lots of people buying with all-cash or mostly-cash. You're not at all rate-sensitive if you're a cash buyer. 5) A lot of these cash-heavy buyers are powered by generational wealth. 6) The housing shortage in the US is incredibly acute, so much so that the market will continue chugging along even as borrowing conditions worsen considerably. I bought a couple of years ago when the market was r…

Cash buyers are not necessarily interest rate insensitive. When I bought a house earlier this year, my lender advertised a cash offer program. They would by the house with cash on my behalf. Then, they would confirm they could give me the mortgage, and sell the house to me at the same time they give me the mortgage. This program wasn't available in my state, but might be common enough in others to skew the numbers.

Institutional (or rich) buyers have the option of buying the house in cash, then taking out a loan against the house. This gives them the benefit of being able to make an all cash offer, and the long term benefit of leveraged, low interest debt.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#149

Post by lamontcg »

aschearer wrote: post #113
hotpotamus wrote: post #108

Earlier quoted context omitted.

Hasn't square footage also trended up? That's why you use something like the Case-Shiller index to chart housing prices. I know those components go into it and perhaps others.

OK here's the Case-Sheller index[1]. Running the examples from before: 1980: 63 (actually for 1987, earliest in the chart) 2001: 110 2022: 305 I'm no economist so I won't try to interpret these numbers, but if higher is worse then it supports my original point. [1]: https://fred.stlouisfed.org/series/CSUSHPISA

That post-pandemic bubble is pretty insane. I didn't realize it went up that quickly.

Everyone better buckle up.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#150

Post by lamontcg »

onlyrealcuzzo wrote: post #55
adamredwoods wrote: post #20

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 no idea who is buying houses at these prices, if it's not Blackwater-type firms. US housing at 2% 15-year fixed is the biggest handout the world has ever seen. That's why Blackrock-type firms GOBBLED up real estate. They were the first ones to back out when interest rates started going up. They're not the ones buying. I'm guessing the people who are buying are either 1) completely desperate, 2) oblivious, or…

You'll see a lot of comments in these kinds of threads by posters who say that they're just buying now and don't care since they're in it for the long term and will just ride it out. Not sure if those people are paying mostly cash or if they're just not factoring in that they may lose their jobs in ~12 months.
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