U.S. mortgage interest rates jump to 7.16%, highest since 2001 • Hacker News Board

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#91

Post by mupuff1234 » Wed, Oct 26, 2022, 3:27 PM UTC

algoatecorn wrote: post #44

rossdavidh wrote: post #7

If 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…

Not selling doesn't magically make your house keep it's market value.

As long as there's someone in the vicinity selling at a lower price your house would lose value either way. And there's always someone selling.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#92

Post by o_1 » Wed, Oct 26, 2022, 3:27 PM UTC

ed25519FUUU wrote: post #11

rr888 wrote: post #8

The difference is higher inflation, which likely leads to higher pay rises, so actually the real interest rate is lower than it was.

Still waiting on that sweet inflation adjusted pay raise.

Hahaha. I think everyone is.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#93

Post by deathanatos » Wed, Oct 26, 2022, 3:28 PM UTC

tonmoy wrote: post #24

rossdavidh wrote: post #7

If 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.

Rents aren't going to go down. Raising mortgage rates makes housing more expensive, by raising the cost of the mortgage. That's going to force some would-be buyers to not be buyers, and to instead, rent. More demand on rent => prices go up.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#94

Post by andsoitis » Wed, Oct 26, 2022, 3:28 PM UTC

Sohcahtoa82 wrote: post #74

ren_engineer wrote: post #35

Earlier quoted context omitted.

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

> you think people are going to pay mortgages they are massively underwater on? Yes? Why wouldn't you? It seems pretty short-sighted to just put your arms in the air, give up, get foreclosed on, lose your home, and have your credit be absolutely wrecked for the next 7 years. Just keep making your payments and ride it out. The market will eventually recover. I think the only reason to give up is if you fell for the sc…

Concur.

As a relatively new first-time homeowner (a year), do you know whether a mortgage lender requires higher or additional insurance coverage for an underwater property?

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#95

Post by NDizzle » Wed, Oct 26, 2022, 3:28 PM UTC

asdev wrote: post #63

people in the comments don't seem to realize if prices drop, you can buy and refinance later when rates come down. so it's really a great time to keep an eye on the market

When do you expect rates to come down?

Prices aren't dropping that much - inflation. If you're expecting a 40% price drop anytime soon, well, don't hold your breath.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#96

Post by irrational » Wed, Oct 26, 2022, 3:28 PM UTC

ren_engineer wrote: post #35

khuey wrote: post #17

Earlier 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

> you think people are going to pay mortgages they are massively underwater on?

Yes? Our home keeps the rain off our heads. I’m not going to risk that by not paying my mortgage just because I couldn’t sell my house right now for enough to cover the mortgage.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#97

Post by Test0129 » Wed, Oct 26, 2022, 3:28 PM UTC

mupuff1234 wrote: post #91

algoatecorn wrote: post #44

Earlier quoted context omitted.

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…

Not selling doesn't magically make your house keep it's market value. As long as there's someone in the vicinity selling at a lower price your house would lose value either way. And there's always someone selling.

It does however make it irrelevant. If you never plan on selling and your mortgage rate is low then you're winning on inflationary terms.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#98

Post by pchristensen » Wed, Oct 26, 2022, 3:29 PM UTC

Sohcahtoa82 wrote: post #74

ren_engineer wrote: post #35

Earlier quoted context omitted.

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

> you think people are going to pay mortgages they are massively underwater on? Yes? Why wouldn't you? It seems pretty short-sighted to just put your arms in the air, give up, get foreclosed on, lose your home, and have your credit be absolutely wrecked for the next 7 years. Just keep making your payments and ride it out. The market will eventually recover. I think the only reason to give up is if you fell for the sc…

I bought a house in the Chicago suburbs in August 2007 for $275k. I short sold it 4 years later for $115k. It sold 2 years ago (13 years afer I bought it) for $210k.

"Eventually" is doing a lot of work in your comment.

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#99

Post by NDizzle » Wed, Oct 26, 2022, 3:29 PM UTC

AlwaysRock wrote: post #59

falcolas wrote: post #38

I 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.

Was looking at a house. A 2% mortgage vs a 7% mortgage effectively doubles the cost of the mortgages every month. It's a stupid time to buy a house.

Unless you have a ton of cash.

For example, if you were a tech worker in California, unable to eat out or go out regularly for 2 years, so you piled up cash...

And now the rest of the country looks like a good choice, compared to CA policy...

Re: U.S. mortgage interest rates jump to 7.16%, highest since 2001

#100

Post by sdenton4 » Wed, Oct 26, 2022, 3:30 PM UTC

googlryas wrote: post #55

Financial Ignoramus here - looking back - were ultra low rates a mistake? It seems insane that this number has grown so much since even last year. Would slowly growing them over a longer period have been better than these huge jumps? It seems wrong that I refinanced a 500k mortgage last year and I would be paying ~35% less per month than someone who did the same thing today.

The trick here is that high interest rates may be the smallest possible evil: we had a two year pandemic and all kinds of stacked global economic catastrophes (with the War of Russian Aggression still ongoing), from which you would expect major economic problems to arise. The measures taken to stage off the worst possible effects are now manifesting high interest rates. The cure can hurt, too.

There's definitely a big element of missed opportunity, though. Non-billionaires got a giant infusion of cash through higher wages and such, for the first time in decades... So, too much money chasing too few goods in the short term, giving inflation. But in the longer run, it would be far better to rework the economy to actually meet the demands of non billionaires (housing, education, medical care, oh my) than to complain about how the proles have money all the sudden and plot new ways to take it away from them.