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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

#181

Post by toast0 »

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?

The payments might be comparable to if they got a current rate mortgage at the current value.

There's reasons it would be nicer to have a lower loan balance at a higher rate and the same stream of payments, but it's probably not worth the cost of moving and a foreclosure on your record.

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

#182

Post by supertrope »

HWR_14 wrote: post #174
Sohcahtoa82 wrote: post #74

Earlier quoted context omitted.

> 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…

> Why wouldn't you? Because it's upside down? You can buy another place and owe less on it?

Unless you can buy the next house in cash you'll be waiting seven years for your credit to recover.

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

#183

Post by not_the_fda »

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.

Thats not how property taxes usually work. Most municipalities set a millage rate based on how much revenue they want. If property values decrease, the millage rate goes up. If all property went down 30% the millage rate is adjusted accordingly to hit the revenue target.

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

#184

Post by JeremyNT »

ed25519FUUU wrote: post #18

We have a great house with a 2.75% mortgage. It would be hard to leave now, because a similar house would be a much higher monthly mortgage. Stuck, but thankfully we really love it and not plan on leaving.

I'm in the opposite boat. We had to move for work, and we bought a crappy house in a town I desperately want to leave as soon as possible. The housing market was going bonkers, so we now have a huge mortgage (but at a low rate).

Now? The price of the house we bought is dropping, and the cost of buying any house anywhere else is effectively going up because of the rate increase.

Putting aside my narrow self interest in the bubble being sustained so I can move without losing my shirt, I do hope that this causes actual home values to go down. A lot of first time buyers would have been really hard pressed to afford the down payment at the peak of the bubble, so it's good for them that things are correcting now.

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

#185

Post by avgDev »

rsj_hn wrote: post #177
avgDev wrote: post #137

Earlier quoted context omitted.

Are you just saying things or have you actually looked? Average home price in 1965 was $21k. Average home price in 2020 was $514k. Long term after every drop the prices have surpassed ATH. https://fred.stlouisfed.org/series/ASPUS

Average house built today is 2,560 square feet[1]. In 1950, it was 980 square feet. plumbing/electrical/insulation are all different. Many would not enjoy living in a 1950 house, and a typical 1950 house would not sell for the price of an average house in 2020 [1] https://www.nahb.org/blog/2022/03/new-single-family-home-siz...

Not sure what point you are trying to drive across. The graph I posted shows a macro trend.

My home was built in 1970s. I believe the initial price was around $40k. Current worth is $450k.

It is hard to take all the different things into account.

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

#186

Post by BuckRogers »

jollyllama wrote: post #131
mym1990 wrote: post #65

Earlier quoted context omitted.

It’s still not a great time to look for a house. Prices have come down some but no where near enough to offset how much they went up by in the first 2 years. I guess if someone’s price anchor has been reset to the new normal, a house now looks great…

It can go one of two ways. Inventory continues its years long downward trend as people stop selling due to the price drops. Or, the increased rates combined with price drops trigger a wave of foreclosures and the market crashes hard. I think the former is more likely.

Inventory continues to rise today while new listings go down. Prices are going down continuously in my market. The outlook for a cash buyer is good right now, especially by January.

All it will take is one more economic blip and your 2nd scenario becomes true. Which I've read a recession is to be declared before the end of the year and it's a sure thing.

We're already have improved conditions for home buying unless you're cash poor. I know I'm in a better position than I was in March of this year. I've been working these sellers hard and they're powerless. By January through the rest of 2023, they're going to be completely at a cash buyer's mercy.

The zero-savings lemmings are out of the market. The ones that foolishly drove up their own prices, instead of pocketing the savings on 3% loans.

I'd bet on Powell fulfilling his promise to correct real estate prices to affordable levels. It's nowhere close to being done yet, so everyone that bought a house with cheap money better like what they purchased. Probably not, since in the 3% era you had about 30 minutes to decide if you were going to buy the home or not.

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

#188

Post by BuckRogers »

lotsofpulp wrote: post #15
bfrog wrote: post #5

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

Why only cash buyers? Even if I am borrowing money to pay for something, I would rather pay less than more.

You can win like a cash buyer if you pay a 2nd payment every year. If you plan on paying the minimum though, you definitely lose at 7% vs 3%. You are correct. As long as someone drops that extra payment monthly or yearly, depending on the amount and if you ensure it all applies to the principal with your lender.

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

#189

Post by teeray »

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…

So everyone’s equity is now converted into more bank profits. Neat.

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

#190

Post by Mochsner »

mattbrewsbytes wrote: post #119
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…

> 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 ri…

If you're downsizing, full cash or majority cash offers (if an option) would be the exception here.
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