There’s a ticking clock right now for 5/1 ARM. If rates stay elevated then many are going to be out of a home.
Sure, but who was opting for an ARM in the last 5 years?
Not the last 5 years - the last ~8 months.
U.S. mortgage interest rates jump to 7.16%, highest since 2001
41–50 of 297 posts
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#42Earlier quoted context omitted.
A lot of people simply won't sell in that situation which is going to further constrain supply.
you think people are going to pay mortgages they are massively underwater on? This also ignores the fact that the Fed's stated goal with raising interests rates is to increase unemployment to slow inflation. You are already seeing the results in quarterly financials. Once layoffs start happening people won't have an option but to sell when they can't make payments
In most states, lenders have recourse. So if you stop paying your mortgage, the bank will foreclose on your home and then come after your other assets to make up the difference in what you owe vs. what the home is currently worth.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#43Isn't there "midterm" elections coming up in two months in the US? Aren't moves like spiking the rent to induce mass unemployment likely to benefit the Republican party? It can't be a winning strategy.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#44If rates go from a low of 2% up to, say, 9%, then in order to keep the mortgage payment the same, the price of a $400,000 house would have to drop to around $230,000. This assumes a 30-year fixed rate mortgage, and the details will vary depending on money down, etc. but the basic fact remains that house prices will need to fall by a lot, down to levels of 5 years ago or more, before the current interest rate hiking c…
Most of the people I speak to who locked in Current renters will have lower potential to save on a monthly basis, only to get 30-40% off on their first home with a >7% interest rate. If you sum the lost savings from rent plus the additional interest payment, it is uncertain whether that is the best strategy. That is also assuming real estate prices in certain regions wont hold stronger value, which they probably will. Some areas in the South East, Midwest, and Front Range will likely not see such a drop in value with respect to interest rates and mortgage payments. The demand is just too high.
Not to mention that rent is collected by people who are now in a better position to purchase newly discounted real estate without loans, further fueling price demand by competing against each other and shortening supply.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#45Earlier quoted context omitted.
Why only cash buyers? Even if I am borrowing money to pay for something, I would rather pay less than more.
Because you would theoretically be paying the same amount, just paying it as interest instead of principal. It's not practically that big of a deal, but it does mean you would have less equity. If you had to sell it, you would get much less back, and you might have more taxable gain if you don't qualify for §121 exclusion.
> If you had to sell it, you would get much less back, and you might have more taxable gain if you don't qualify for §121 exclusion.
This is a separate calculation of how much one can sell their house for relative to purchase price, unrelated to preferring low interest rate/high purchase price or high interest rate/low purchase price.
But based on decades of interest rate history, it would seem prudent to bet the Fed will lower rates again in a few years and you can refinance to a lower interest rate.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#46I saw someone point out that this interest rate hike will effectively nullify any bubble breaks. House prices could drop over 30% (the amount it dropped in the last housing bubble popping) and the monthly mortgage payment will still be more than it was before. A terrible time to be looking for a house.
>A terrible time to be looking for a house.
This has been a true statement since like, what, 2008?
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#47Earlier quoted context omitted.
A lot of people simply won't sell in that situation which is going to further constrain supply.
you think people are going to pay mortgages they are massively underwater on? This also ignores the fact that the Fed's stated goal with raising interests rates is to increase unemployment to slow inflation. You are already seeing the results in quarterly financials. Once layoffs start happening people won't have an option but to sell when they can't make payments
Good point, and I wonder if the term "jingle mail" (mailing the bank your house keys instead of a monthly mortgage check) is going to make a comeback.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#48Earlier quoted context omitted.
I hear this every cycle, but people forget even if the person who bought high won't, their neighbor who bought low (maybe a long time ago) will. And a lot of people end up having to sell.
And dropping prices mean that someone who's been holding out over the last few years of insane price growth might finally find a home elsewhere that they can afford. As someone who was too young to climb aboard the price bubble of the last 5 years: here's hoping.
The price would have to drop dramatically (30%, the amount the last bubble dropped, would not be enough) to get a lower monthly mortgage payment.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#49Great news - affordable housing is around the corner! This will also deep-six people speculating on real estate or buying homes to AirBnB them (won't be profitable). All good news.
Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001
#50If rates go from a low of 2% up to, say, 9%, then in order to keep the mortgage payment the same, the price of a $400,000 house would have to drop to around $230,000. This assumes a 30-year fixed rate mortgage, and the details will vary depending on money down, etc. but the basic fact remains that house prices will need to fall by a lot, down to levels of 5 years ago or more, before the current interest rate hiking c…
People would just rent instead of buying house. Rent should not go down that much. So buyers with cash will just buy houses and rent it out.
I do see evidence of people renting, because they intend to buy next year when the prices are lower. So I do think rent will be a lagging indicator, and will keep going up for a while. That will keep the inflationary pressure on the Fed to raise rates higher and for longer.