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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

#151

Post by mywittyname »

buscoquadnary wrote: post #120
epistasis wrote: post #68

Earlier quoted context omitted.

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 re…

And some of those investors already lost their asses buying up SFH. I'm sure the rest see the writing on the wall. For example, BRG spun off a home trust division just this month, and it's the one that bought up all of these SFH during the boom. Could it be that they were expecting a massive drop in value of these investments?

SFH are a pretty insane choice of RE investment for institutions because they are so incredibly inefficient compared to apartment and office buildings.

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

#152

Post by taylodl »

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…

That's not what happened in 2008. This exact scenario was the primary cause of the financial meltdown at the time. The prevailing wisdom was people would always pay their mortgage, so the securitization of real estate mortgages were viewed as a safe investment - and invest they did! When the housing bubble popped a lot of investment banks who thought they had safe assets suddenly found themselves upside down, further compounding the problem and turning it into a full-fledged crises necessitating congressional intervention. Perhaps you're too young to know this story, but this is what happened. There's no reason to believe homeowners won't behave in the same manner today. We can argue whether this behavior is rational or not, but we're rather infamous for not being rational creatures, are we not?

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

#153

Post by khyryk »

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.

Deaths, divorces, moves, bankruptcies, etc. still happen, so there's still a market. The average peasant didn't suddenly begin to make 2x more per month, so for the same fixed monthly payment, the house price needs to go way down. Cash buyers may be less sensitive to rates, but even they have significantly slowed purchases since the low rate frenzy.

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

#155

Post by bjornsing »

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…

Why only to $230,000? Wouldn’t the price have to drop to 400*(2/9)=89k to keep mortgage payments the same?

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

#156

Post by lotsofpulp »

mminer237 wrote: post #102
lotsofpulp wrote: post #45

Earlier quoted context omitted.

> 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 yo…

You would have to account for the difference in down payment and opportunity cost of investing the $37k difference in down payments for the same period.

So in the 7% scenario, you have $37k + investment return + $10.5k.

In the 2% scenario, you have $42k.

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

#157

Post by BuckRogers »

Test0129 wrote: post #97
mupuff1234 wrote: post #91

Earlier quoted context omitted.

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.

I'm not sure if I'd call it irrelevant. People have to do fast home sales for many reasons, and it can come up as a necessity at any time. Life can be a twisty road that we can't foresee. I suppose I can't disagree that hoping for the best makes it irrelevant.

Your second statement I wanted to agree with but you never really win with any mortgage (other than getting a home, which is important).

You'll pay for any house at any rate 2-3+ times over if you just pay the minimum payments. When you go to sell it at the end, your home will not have doubled in value or more. Not for anyone born after 1980 at least.

The only way to win financially is to pay off the house, or beat out usury by producing reliable market gains or other income to outpace it. Easier said than done, I would just pay off a home as fast as possible.

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

#158

Post by dividefuel »

symlinkk wrote: post #87

I’m pretty sure I bought at the worst possible time (March). Every month that goes by, thousands of dollars of my net worth disappear because of circumstances completely out of my control. It makes me doubt the value of hard work - sure, if you slave away at your desk job you can earn maybe an extra $30k a year, but the guy down the road who just happened to buy a house at the right time earned an extra $300k over th…

I bought at a similar time, right as rates were starting to really tick up. I got in at 3.75%. That time looks to be the tipping point, but in which direction is still not clear to me.

Decreasing home value only matters if you need to sell. If you plan to live in your home for a long time, the changes in the dollar value of the house in the meantime aren't as big of a deal. However, spring was clearly the peak of this market, and it's hard to know how long it will be until a house reaches the same dollar value. It depends a lot on how long interest rates stay high.

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

#159

Post by cameronh90 »

symlinkk wrote: post #87

I’m pretty sure I bought at the worst possible time (March). Every month that goes by, thousands of dollars of my net worth disappear because of circumstances completely out of my control. It makes me doubt the value of hard work - sure, if you slave away at your desk job you can earn maybe an extra $30k a year, but the guy down the road who just happened to buy a house at the right time earned an extra $300k over th…

Time in the market beats timing the market.

You were always going to need somewhere to live, so whatever net worth you have that's locked inside your house is almost theoretical. Even if house prices crash a huge amount, they'll probably come back at some point, unless we're heading for an era of Japan-style stagnation.

It's not ideal, but as someone in a similar boat to you (price agreed mid 2021), I'm probably going to end up technically underwater at some point despite dropping a large deposit. Only thing to do is to bear down and at least be happy that you have a house.

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

#160

Post by toomuchtodo »

kotlin2 wrote: post #133
toomuchtodo wrote: post #75

Earlier quoted context omitted.

I’ve defaulted on two mortgages in a recourse state, one primary residence, one investment property. Neither was pursued. While extreme, you can always move to Texas or Florida; they have incredibly strong creditor protections making you mostly judgement proof. Depends on your threat model, exposure, and risk tolerance. (not legal advice, educational purposes only)

How much did you owe after the properties were sold?

Zero. And I was eligible for a new FHA mortgage 3 years after.
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