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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

#111

Post by ethbr0 »

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…

In the US at least, we really should simplify, ease, and mandate 401k loans/withdrawal options for first-time homebuying.

Doesn't help if rent eats all your paycheck, but if people are able to save they should be rewarded for doing so, and allowed to use that for a first home purchase.

https://www.investopedia.com/ask/answers/081815/can-i-take-m...

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

#113

Post by nisegami »

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.

Another win for land-value taxes over property taxes.

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

#114

Post by kbelder »

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.

Only If you accept the wonderous concept that circumstances don't affect behavior.

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

#115

Post by post_break »

avgDev wrote: post #105
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.

I'm sorry are you saying 4.09% is a good rate? Anything 2% or lower is a good rate, my house was 4% back in 2019.

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

#116

Post by abeppu »

ltbarcly3 wrote: post #12

How this effects housing prices: Housing prices are determined largely by what payments people can manage to make. At 3.22% (the approximate rate on Jan 1 2022) A $2000 payment can finance $462,000. At 7.7% (what google says is the current average rate) it would only finance about $280,000. At 12% (my personal guess at where rates will peak in about 18 months before quickly returning to around 7% for several years af…

> At 12% (my personal guess at where rates will peak in about 18 months before quickly returning to around 7% for several years after that) it will finance $195,000.

Would you share some of the thought process for how you arrived at that guess? This is not at all my area and while I can understand how someone might guess "rates will continue to rise for at least a while longer" I don't really have an understanding of how / with what information someone would arrive at such a specific, multi-stage prediction (i.e. you picked a peak, when it will be reached, and what will happen after).

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

#117

Post by avgDev »

SevenNation wrote: post #101

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 ho…

It is recommended that when you buy a house you buy it long term 5+ years.

It is recommended that when you purchase index funds as investment you buy and hold long term 5+ years.

The reason for this is because prices will fluctuate SHORT term, but generally are very stable long term and provide a return on investment.

If we take a look at the current situation, even if someone becomes underwater on their house, they can still have lower payments due to really low interest rates, a 4% rate hike is HUGE.

"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."

This is extremely flawed thinking and equivalent to "investors" who buy high and sell low. Real estate IS A LONG TERM investment, not day trading.

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

#118

Post by jacv »

bushbaba wrote: post #81
jacv wrote: post #25

Earlier quoted context omitted.

I would think this could help with people trying to buy their first place. I think a fair amount of people - particularly those in HCOL cities - could afford monthly payments that are on the high side, but saving for a 20% deposit has been more difficult because of how high prices have been (ie, stuck in a rent cycle of only saving a bit because of how high rent is and so on).

Same markets offer 5% or 0% down loans. Financing isn’t the problem it’s the monthly cost. Rent is cheaper than owning in Seattle, LA, and SF metro areas for a large portion of the housing stock.

I don’t think I agree with you. I don’t know of a lender offering 0% down loans for people in those markets (the only thing I could find was VA loans or USDA), but could be wrong.

For a large portion of people, monthly cost is not the big problem. A 20% down payment on an median home price of $850k (Seattle), $1M (LA), $1.3M (SF) (all these taken from google’s results) is because it’s very hard to save that much money when you’re paying median rent of $2.7k (Seattle), $3.3k (LA), or $4k (SF) (Zumper, 2bd apartment).

All else equal, I think a lot of people when trying to buy for the first time would prefer lower house purchase price with higher interest rate because of saving for a down payment vs the same house at a higher price and lower interest rate.

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

#119

Post by mattbrewsbytes »

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…

> locked in Not just that but looking further out at retirement, downsizing and staying in the same area is not looking possible. The house might be worth $X on paper at that point but if you sell you are then thrust into a market where everything is much higher. Its financially more palatable to just stay put even if you don't need the space. I imagine people within a couple years of this decision are staying put right now and this will keep demand up regardless of rates.

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

#120

Post by buscoquadnary »

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?

Basically RE prices went through the roof and became an object of investment that gained in value during a time when money was cheap and cash was a bad place to store it.

This caused management funds, BlackRock Berkshire etc, to start purchasing the homes as investment vehicles. These vehicles then will either sit on a house or simply rent the house out at a rate that makes fiscal sense, regardless of the economic realities.

This artificially restricts supply as they take these houses off the market, they don't care if the house sits empty for years as long as they can sell it at their target price, and then at the same time causes rents to be raised as the rental prices are set by an internal ROI formula and not what the local market can bear.

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