Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

reuters.com

Post reply on HN
Print view View original

101–110 of 178 posts

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#101

Post by blobbers »

https://money.com/housing-market-correction-federal-reserve/

Jerome Powell has indicated he wants to see the housing market correct. Unfortunately, real estate agents and sellers are slow to react. You don't just immediately drop your price to match the payment.

In Bay Area, houses effectively dropped from 2 => 1.85. They should drop 150K; but with the latest interest rate hike of 5.2->6.2 you'll see 50K price drops as buyers/sellers adjust. In reality, prices are still dropping as we bounce off the unreasonably low interest rate of 2-3%.

The interest rate will act as a gravity on prices, but housing prices won't immediately "snap" to the new normal. You'll see house prices begin to crash in a few months as a lagging effect.

On top of this, you'll see new home builds get put on hold, because the builders specifically won't be able to find people to buy a new house for a high price; their margins will be squeezed. With existing homeowners, they can at least hunker down in their well financed 30 year fixed rates.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#102

Post by reggedtorespond »

Ar-Curunir wrote: post #28
time_to_smile wrote: post #24

Earlier quoted context omitted.

For anyone relatively young seeing this range and thinking "ridiculous!", it's not. Growing up my parents rate was 12% and in the early 80s rates got up to over 17% [0]. It is very possible for the era of cheap money to end across the board. 0. https://www.freddiemac.com/pmms/pmms30

House prices were also much lower in your parents time.

Right, and this is a hard point to overstate. The average home price was around $80,000 in the early 80s, whereas it's currently $525,000. If we see home prices drop by 85% we won't be buying homes with US dollars any more.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#103

Post by hollywood_court »

giantg2 wrote: post #50
hollywood_court wrote: post #34

Earlier quoted context omitted.

My wife and I have been waiting for this for a few years now. We live in a college town in the South and the prices here are fairly delusional. I imagine this will allow for some market correction and we’ll be able to get into a bigger home.

I sort of doubt it will correct very much. I assume a fair percentage of the homes are rentals. Landlords won't care to lower prices. They have a client based that's geographically constrained to the college and able to get easy money from the government.

None of the homes we'd be interested in are rentals. Our town presently has ~3k more rental bedrooms than it has college students so a lot of the rental properties are actually going on the market now. But again nothing we'd be interested in buying. But even with the ~3k additional rooms, developers are still building apartment complexes that are "student only". I'm not sure how they plan to fill them.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#104

Post by aschearer »

paulmd wrote: post #100
aschearer wrote: post #95

People are bringing up that past rates were higher but leaving out how much lower past prices were. Have a look at rates over time[1] vs median home price[2]. Yes rates were 16% in 1980 but the median home was $64,000. That's $230,000 in today's dollars. If you'd prefer to pick a time when rates were more comparable, how about 2001 at 7%. The median home price was $180,000. $301,000 in today's dollars. Today's median…

Yeah, people price housing in terms of the monthly payment, not the dollar amount so much... higher interest rates mean people can afford less principal. And mortgage rates have doubled in less than a year. (of course, in practice, once they've bought , people tend to be averse to their "investment" losing 20% or 30%, even if they did lock in a good interest rate they'll be paying for years to make up the fall. this…

Wouldn't you agree the dollar amount plus the interest rate broadly determine the monthly payment? So we can compare a 2001 home at $300,000 for 7% vs a 2020 home at $440,000. Someone buying a home today will pay more month to month for a median home.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#105

Post by mikeyouse »

giantg2 wrote: post #54
mikeyouse wrote: post #13

Pretty crazy correction if you run the math on mortgage payments. I bought a place 1 year ago with a 2.75% rate. Say you're somewhere outside a major metro buying a $500k house. With a $100k down payment, a 2.75% rate equates to $1,633/month. A 6.5% rate equates to $2,500/month. With $600/month in taxes/insurance, the "don't spend more than 40% of your income on housing" rule means the necessary income to comfortably…

That 40% rule seems nuts. Who is making $65k that can truly afford a $500k house?

Like most rules-of-thumb, they're 'fuzzy' and it's not about the total home value but the actual monthly cost of ownership.

Pick a state though, say Missouri. A married couple earning $65k will bring home $50k after tax. In the first example, with a mortgage + tax + insurance house cost of $2,200/month, their home costs will be about $25k/year leaving them about $25k for other spending. Not lavish, but likely doable.

The real comparison though, is what they could rent an apartment for as the alternative to buying that house. In most places, they'd be paying nearly that same total in rent so it's basically a wash (assuming they can come up with the down payment).

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#106

Post by greensoap »

onlyrealcuzzo wrote: post #75
theandrewbailey wrote: post #21

People with adjustable or variable rate mortgages are probably full of regret right now.

Well 90% of Us mortgages are fixed. Of the ARM mortgages, nearly 90% of them have longer terms than 1 year. You're looking at maybe 2% of mortgages that will be impacted unless rates stay this high for >2 years. Everywhere else in the world beside Denmark, where there are ONLY ARM mortgages - they're gonna be in for a world of hurt if interest rates stay this high for >2 years...

I mean you would really have to go back to 2015 or 2017 and look at how many people were taking 5 or 7 year arms.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#107

Post by yieldcrv »

mrosett wrote: post #22
yieldcrv wrote: post #14

Earlier quoted context omitted.

rates have nearly tripled in the last year no need to go that far out

https://xkcd.com/605/

a new category of barely relevant XKCD

the only similarity would be the 1 year aspect matching the sample size of 1 in that comic, but the driving forces are the quantitative tightening which are a greater sample size, and the velocity is important

there's better jokes

if mortgage rates want to stay 100% over Fed Funds rate, or 100% over 30yr treasuries, we'll have 8-9% by end of year, with many borrowers already being offered or experiencing 10%+ by then

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#108

Post by hotpotamus »

aschearer wrote: post #95

People are bringing up that past rates were higher but leaving out how much lower past prices were. Have a look at rates over time[1] vs median home price[2]. Yes rates were 16% in 1980 but the median home was $64,000. That's $230,000 in today's dollars. If you'd prefer to pick a time when rates were more comparable, how about 2001 at 7%. The median home price was $180,000. $301,000 in today's dollars. Today's median…

Hasn't square footage also trended up? That's why you use something like the Case-Shiller index to chart housing prices. I know those components go into it and perhaps others.

Re: U.S. mortgage interest rates jump to 6.52%, highest since mid-2008

#110

Post by dmix »

enumjorge wrote: post #26
dymk wrote: post #7

Earlier quoted context omitted.

Why root for the downfall of Redfin and the like? They were finally a lower cost alternative to the stranglehold that RE agents have had on sellers for decades. Why should it cost 6% to sell a house?

I think what the parent commenter is referring to is Redfin’s (along with Zillow and others) practice of buying homes and flipping them. I thought they stopped that a while ago when they saw where the market was headed though.

Redfin over paying for houses seems to be good for homeowners though. If they can't sell them then they'll have to reduce the prices eventually to match the market.

The only loser here seems to be Redfin.

Post reply on HN