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

reuters.com

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

#151

Post by lamontcg »

hardtke wrote: post #80
adamredwoods wrote: post #20

I have been wanting to ladder up to a bigger house for a few years now. For a US$1M house, which is the going rate near my area, the jump from 6% to 7% is $5000/month apr interest to $5834/month apr (not including fees, taxes, and insurance). So to go back to the monthly of $5000 (which is out of my budget), a US$1M house would need to fall to $857,153. That is NOT happening around here. I have no idea who is buying…

I don't expect prices to drop much because they are based on the assumption that interest rates will drop and new homeowners can refinance later. We see that with the inverted Treasury yield curve where long term interest rates are projected to be lower than today's rates. Also, with current homeowners locked into their low rates, there will be a shortage of houses on the market (you can't take your low mortgage rate…

> The only people selling now are people that absolutely need to.

The number of people in economic distress being forced to sell their houses will be rising over the next 12 months.

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

#152

Post by lumost »

sytelus wrote: post #122
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…

Economists need to figure out how people are buying these expensive houses. I work in big tech and probably in 1-2% and I am still priced out of market even outside of CA. How do other people not in big tech do it? My guess is that most people buying houses are double-income families which wasn't the case in 1980s. Note to self: If you want Ameican dream, make sure you marry someone who makes as good income as you :)…

If your family owned real estate in 1980, then odds are good that generational wealth provides the needed liquidity. As has been discussed elsewhere in this thread, the monthly payments haven't changed much as a function of income - it's only the nominal price and the associated down payment that's changed over time.

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

#153

Post by czbond »

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.

High interest rates on their way up drop the price of homes.

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

#154

Post by lamontcg »

mrep wrote: post #145
Sohcahtoa82 wrote: post #131

Earlier quoted context omitted.

Someone explain to me why someone would ever get an ARM unless you were planning on selling the house before it adjusted, because it just seems like an invitation to get fucked.

I got a 10 year ARM back in march as it was 1.125% lower than a 30 year fixed. If I cannot get a good refinance in the first 7 years, I'll just focus on paying it off fully in the next 3. Worse comes to worse, I'm like 95% certain it will be worth at least what I paid for it in 10 years if I did need to sell it for any reason so I'm not worried at all.

Your income/net worth is high enough to be like "I'll just pay it off in 3 years, no biggie". Not terribly typical.

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

#155

Post by aschearer »

colinmhayes wrote: post #146
jeffbee wrote: post #12

Earlier quoted context omitted.

Er, either that or the seller is going to get a much lower price than they desired. In reality, a linear solution of these two conflicting desires.

Or the housing market liquidity will collapse as all the would be sellers sit on their house while they wait for rates to go back down.

Tend to think this is what will happen. Unless you have no choice what advantage is there to move if your interest rate is less than 4% in today's market? Almost certainly moving will mean a smaller/worse home for more money each month.

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

#156

Post by onlyrealcuzzo »

onlyrealcuzzo wrote: post #55
adamredwoods wrote: post #20

I have been wanting to ladder up to a bigger house for a few years now. For a US$1M house, which is the going rate near my area, the jump from 6% to 7% is $5000/month apr interest to $5834/month apr (not including fees, taxes, and insurance). So to go back to the monthly of $5000 (which is out of my budget), a US$1M house would need to fall to $857,153. That is NOT happening around here. I have no idea who is buying…

> I have no idea who is buying houses at these prices, if it's not Blackwater-type firms. US housing at 2% 15-year fixed is the biggest handout the world has ever seen. That's why Blackrock-type firms GOBBLED up real estate. They were the first ones to back out when interest rates started going up. They're not the ones buying. I'm guessing the people who are buying are either 1) completely desperate, 2) oblivious, or…

EDIT:

Important technicality - Blackrock and other large institutions don't buy SFH directly. They do it indirectly through other funds, like REITs.

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

#157

Post by jeffbee »

runnr_az wrote: post #35
ramesh31 wrote: post #17

Earlier quoted context omitted.

Someone is buying them, and it’s definitely not the average American. I have a 90th percentile income, and I cannot afford the median (or mean) home price in the US.

It's weird, right? Like... who is paying these crazy prices?

This is basically you refusing to believe in wealth and income inequality. Once you realize that the 99th percentile net worth is 100x the median net worth, and the 99th percentile income is 50x the median, and the 99.99th percentile is 50x the 99th, it should start to become clear. There are millions of people out there walking around with fairly large inherited assets and the only thing they can imagine doing with it is parking it all in real estate.

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

#158

Post by onlyrealcuzzo »

clcaev wrote: post #98
lumost wrote: post #83

Earlier quoted context omitted.

They don't need to use mortgage financing, they can borrow the money through other methods. One consequence of Fed Reserve rate setting in combination with a regulated mortgage market is that private equity firms can borrow at lower rates than individual borrowers. I wouldn't be surprised to learn that this dynamic has been a major contributor to housing prices rising so quickly.

Do you mind pointing to a paper that explains this phenomena?

BlackRock buys stakes in investment firms that directly purchase real estate (some specifically SFH).

Those companies issue corporate debt (bonds) to buy houses.

The yield they need to offer goes down when the Fed manipulates bond prices by gobbling up non-corporate debt (US Treasuries & MBS).

BlackRock & other firms aren't taking on debt to invest in REITs - they're just directing more of their portofolio to REITs when The Fed drives down yields.

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

#159

Post by mrep »

lamontcg wrote: post #154
mrep wrote: post #145

Earlier quoted context omitted.

I got a 10 year ARM back in march as it was 1.125% lower than a 30 year fixed. If I cannot get a good refinance in the first 7 years, I'll just focus on paying it off fully in the next 3. Worse comes to worse, I'm like 95% certain it will be worth at least what I paid for it in 10 years if I did need to sell it for any reason so I'm not worried at all.

Your income/net worth is high enough to be like "I'll just pay it off in 3 years, no biggie". Not terribly typical.

That and 7 years of savings between now and then but they asked why you would get one and that is one reason why.

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

#160

Post by alkonaut »

ramesh31 wrote: post #147
colinmhayes wrote: post #144

Earlier quoted context omitted.

90th percentile US individual income is 130k. Median house is around 440. You can afford a 440k house on 130k income, even if you have a small amount of other debt.

>Median house is around 440. You can afford a 440k house on 130k income, even if you have a small amount of other debt. That's a $3500 monthly housing payment with taxes, PMI, insurance, and 5% down. I bring home $7k net/month. So that would be a 50% monthly housing payment for a 90th percentile income to purchase a median priced home. And that's even if I had the $30-40k cash in the first place to close on the loan,…

Aren’t houses normally bought (and therefore priced) by two income households?
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