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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

#251

Post by theGnuMe »

taylodl wrote: post #235
Sohcahtoa82 wrote: post #226

Earlier quoted context omitted.

> When the housing bubble popped Your comment misses what created the popping of the bubble. The sibling comment talking about sub-prime mortgages talks about them, and I think they're right. I was always under the impression that the crisis began with people that couldn't pay their mortgages because banks were handing them out to people that couldn't afford them. This created downward pressure as foreclosed houses f…

Maybe you and the other commenter were talking about the so-called "jumbo" loans or interest-only loans that had become popular at the time. This was at the height of "flipping" and the idea was you'd make into your house and after five years you'd flip it and make a fortune because home prices were soaring so high. I saw the writing on the wall, but a lot of home buyers apparently didn't realize this was a first-mov…

Jumbo loans are for any house over $648k which is where FHA limits stop.

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

#252

Post by medvezhenok »

another_poster wrote: post #219
snarf21 wrote: post #144

Earlier quoted context omitted.

We should outlaw ARM for most people. It should only be for "accredited borrows" like we do for investing. People who don't really understand the risks get screwed and it creates unnecessary bubbles.

To play devil’s advocate, we really should ban 30 year fixed mortgages, not 5/1 ARMs. I know it sounds contradictory, but hear me out. One of the Fed’s primary methods to control inflation is adjusting economic demand by making loans cheaper or more expensive. In our current regime of fixed mortgages, new home buyers disproportionately bear the cost of the Fed’s effort to reduce inflation, since only they need to pay…

There's also a much easier way to fix [monetary] inflation and that is fiscal - just raise taxes. Much quicker to propagate through the economy too. Just politically challenging.

Right now fiscal is doing the exact opposite, i.e. giving people stimulus while FED raises rates.

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

#253

Post by bxparks »

toast0 wrote: post #167
bxparks wrote: post #104

Earlier quoted context omitted.

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, O…

Refinance in California remains non-recourse as of maybe 10 years ago. Washington isn't really non-recourse, lenders have the option of recourse or non when pursuing foreclosure, non-recourse is significantly faster and is predominantly chosen; but if it was known you had assets, they might choose to go recourse.

According to https://www.bankruptcysoapbox.com/california-extends-protect..., you are correct for loans after Jan 1, 2013. The relevant statute SB-1069 is here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml...

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

#254

Post by theGnuMe »

taylodl wrote: post #220
b3morales wrote: post #168

Earlier quoted context omitted.

This is true, but it's also missing the key part where leading up to 2008 lenders offered mortgages to people they were pretty sure wouldn't be able to keep paying, and then laundered those into the so-called "safe" investment when it was anything but. Is that part repeating now too?

I think the laundering is a bit overstated. Yes, there were "risky" loans being made but those risks were being mitigated by bundling those loans with "safe" loans into a new securities product. No one was really surprised by the risky loans going under. It was the presumably "safe" loans going under that caught everybody off-guard and created the financial storm. The entire mortgage risk model turned out to be wrong…

The securities rating folks basically rated subprime crap as prime. Nobody could trust anything so everyone want to sell and not buy.

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

#255

Post by bjourne »

andsoitis wrote: post #129
bjourne wrote: post #43

Isn't there "midterm" elections coming up in two months in the US? Aren't moves like spiking the rent to induce mass unemployment likely to benefit the Republican party? It can't be a winning strategy.

> It can't be a winning strategy. The Fed is independent in the sense that monetary policy and related decisions are made autonomously and are not subject to approval by the federal government. However, its governors are appointed by the President and must be confirmed by Congress. (citation: investopedia) In parallel, when you're running the government, ideally you're running for the long-term well being of the coun…

Nominally independent but in practice the government still exercises a lot of power over fiscal policy. Thus, it is odd that the government has not exercised its power despite the upcoming election. Likely, lots of politicians will lose their jobs because the people will blame them for the bad economy.

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

#256

Post by lelanthran »

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.

> 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...

Okay, using your own reference, they also say that the median was 13.2 years.

Anyway, from that article you cited, a stunning 76% of homeowners stayed longer than 8 years.

It seems what more than 3/4 of homeowners do is simply live in the damn thing.

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

#257

Post by qqqwerty »

khuey wrote: post #17
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…

A lot of people simply won't sell in that situation which is going to further constrain supply.

Most people only own one home and when they sell their current home they need to buy or rent another one. So for these owners, the supply/demand balance should be minimally impacted by their actions. This is certainly an over simplification of how things work, for example during COVID a flight to the burbs caused a drop in urban condos and rise in single family homes. But on balance, I think it is a good rule of thumb to consider when trying to evaluate the real estate market.

This means that prices are more likely going to be determined by the supply-demand balance between first time buyers, investor activity, new home builders, life events (death, divorce, etc...) and immigration vs emigration. I personally think that if employment holds steady, we will see more of a sideways market with some regional variances, but if employment starts going down then do does housing.

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

#258

Post by qqqwerty »

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 will likely go down, but that doesn't really matter if demand goes down further.

A lot of folks think that higher interest rates are going to result in more people sitting tight which will lower inventory, which in turn will keep prices high. But for most folks, when they sell a house, they are also buying a house. Their net effect on supply/demand washes out. The market is going to be determined by the balance between first time buyers and investors, home builders, sellers due to life events etc... More people sitting tight due to interest rate increases isn't going to save the housing market from price declines.

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

#259

Post by antisthenes »

fknorangesite wrote: post #214
mywittyname wrote: post #123

Earlier quoted context omitted.

> are not planning on selling in the next 10 years or more. Most people don't plan on selling their house when they buy it. Life usually forces you into the situation.

What makes you say that? People often consider places "starter" vs "forever" homes, for example.

Frankly, I don't know any peers (millenials), that are able to afford anything more than a starter home anyway. That seems like a very outdated concept for people who are very well-off.

I mean, most of us aren't even able to afford to buy a home, let alone casually upgrade to a "forever" home. In my high COL area, even starter homes are only affordable for top 20 percentile earners. Everyone else either lives with roommates or parents and rents.

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

#260

Post by pchristensen »

Sohcahtoa82 wrote: post #224
pchristensen wrote: post #98

Earlier quoted context omitted.

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.

Really, I think I'm making three incorrect assumptions: 1. People that buy a house will stay in it for 10+ years. This assumption being wrong means you're more likely to be affected by market swings. 2. Market swings won't be massively significant, for some definition of "massive", and I consider 275k -> 115k massive. Meanwhile, the Z-estimate of my house peaked at $618K this April, and is now at $561K. I would not c…

With taxes, mortgage, and maintenance, I was paying about $1k/mo more than I would have paid for comparable rent. We stayed, watching our house fall in value for over 3 years. Housing is housing, but it's also an investment, and paying $12k extra every year on an asset that would take decades to break even isn't smart. We took the option that was available to us. FWIW, the credit impact wasn't bad, because so many people defaulted on loans in that period so there was a lot of grace given.

That being said, I don't expect 2022-23 to be like 2008-10 for housing.

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