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

reuters.com

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

#101

Post by SevenNation »

Several comments here state very confidently that either the commenter does not plan on moving for many years, or someone they know has similar plans.

The problem with this line of thinking is to keep a brave face when the house is underwater, meaning that the house can not be sold without going into debt to pay it off.

As "homeowners" approach that point, panic starts to take hold. Nobody wants to be trapped in a house they can't sell for risk of destroying their credit. So those brave statements about hodling a house should be viewed in the cold hard light of a multi-year price decline.

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

#102

Post by mminer237 »

lotsofpulp wrote: post #45
mminer237 wrote: post #30

Earlier quoted context omitted.

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…

If you buy a $225,000 house at 7%, you pay $45,000 down and $1,200/month. If things stay like that and you move after five years, you'll have about $169,500 left on your mortgage and thus get about $55,500 back out, $10,500 more than your down payment.

If you buy a $410,000 house at 2%, you pay $82,000 down and $1,200/month. If things stay like that and you move after five years, you'll have about $286,000 left on your mortgage and thus get about $124,000 back out, $42,000 more than your down payment.

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

#103

Post by o_1 »

fortuna86 wrote: post #52

Well great. If you didn't buy a house last year, you won't get another chance for 10-15 years.

Land cannot be created. The interest rate hike is on purpose. Price buyers out of homes from people who've deceased or moved into assisted living. Landlords purchase with cash, interest drops... then homes have a limited availability and increase in price. Repeat

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

#104

Post by bxparks »

kotlin2 wrote: post #42
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

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.

Recourse versus non-recourse mortgages is an interesting difference that most people seem to be unaware of. I do not recall reading about it in any of the disclosures (running hundreds of pages) that I had to read. I only found out about it while researching on the internet.

Apparently, there are only 10 non-recourse states as of 2009: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon, Washington, and Nevada. The tricky thing is that only the initial mortgage is non-recourse. A refinanced mortgage becomes recourse, but interestingly, they don't seem to be required to disclose that in the disclosures.

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

#105

Post by avgDev »

post_break wrote: post #62

Refinancing at 2.5% is the closest I have ever been to winning the lottery. I can't imagine trying to buy a house or finance a car right now, especially with dealers charging crazy ADMs. Something is going to have to give.

A credit union I used for my house which had competitive rates has very good rate for new auto loans. It is about 4.09% for 4-5 years.

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

#106

Post by algoatecorn »

SevenNation wrote: post #89
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…

> Most of the people I speak to who locked in One way to look at this is to ask people what they plan to do. Another way is to look at what they've done. According to this article, the average length of time spent in a house is 8 years: > https://www.thezebra.com/resources/home/average-length-of-ho... So unless those people you know just moved in, they're X years into a average 8 year occupancy.

Agreed. I was just offering an anecdote from my personal circle, many of whom view their real estate purchases as an investment to tuck away. Mostly, these are people who divested a portion or their stock portfolio in mid-2021 and didn't want to sit on cash in anticipation of the current inflation we are seeing now.

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

#107

Post by kitsunesoba »

epistasis wrote: post #68
conception wrote: post #27

Earlier quoted context omitted.

There isn’t a supply issue. There is a corporations buying property issue.

I sometimes hear people say this, but it makes zero sense to me, and I can never get anybody to explain what they mean by it. Could you try to explain how we have enough houses but somehow corporations are the problem?

Corporate buyers are one of the many exacerbating factors, and I think that’s what most are saying when they say corporate home buying is a problem.

In other words, there aren’t enough homes and corporations sitting on some percentage of them is making the situation that much worse.

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

#108

Post by tashoecraft »

dont__panic wrote: post #32
bfrog wrote: post #5

This will pressure prices down presumably which is a good thing for cash buyers but basically no one else.

It's also good for buyers with low net worth, but high yearly income. I got into the tech world 5 years ago, fresh out of college. Many of my peers can afford monthly payments of $2-3k... but getting your hands on $100k cash for a 20% down payment takes time, even at decent income levels.

I've been looking at mortgages over the past couple of months, and putting 20% down has near no effect on my potential monthly payments.

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

#109

Post by allemagne »

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…

Prices don't have to fall back down to pre-inflation levels for inflation to end.

I'm not at all following why it's obvious that mortgage payments will have to be the same for the same house as they were at ~2021 for rate hiking to stop.

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

#110

Post by mindslight »

bushbaba wrote: post #85
mindslight wrote: post #20

Earlier quoted context omitted.

It's a good thing for everyone. Even if you have a mortgage, when the principal is lower you can pay it off sooner by paying more than the minimum. This inflated asset bubble is strangling our society, especially for housing.

If home values decline by 50%. So do property tax revenues. You’d have stated needing to layoff a large portion of their police and education staff.

That's not at all how real estate valuations work in my experience. In times of asset inflation, they lag to cut homeowners a break. So much so that other tax authorities outright reject using municipal valuations on their filings.

And municipal valuations never go down, barring someone paying for an independent appraisal and going through the abatement process. If real estate values corrected by 50%, then the people who really complained might be able to get their taxes reduced by 10%. But even that's doubtful.

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