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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

#161

Post by colinmhayes »

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,…

I think the issue is more that you can't save the 100ish thousand needed to avoid pmi. Assuming you live in the a HCOL area that's understandable. I live in Chicago and am spending 25k a year since my total housing costs come out to less than 1k a month, so I'm already halfway to saving the down payment after just a year. If you don't want roommates than you should be looking at household income, for which 90th percentile is 200k, making a 440k house pretty easy to afford.

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

#162

Post by ryathal »

Sohcahtoa82 wrote: post #131
theandrewbailey wrote: post #21

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

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.

When rates were low it really didn't make sense, unless you planned to be paid off before adjustments. If you have poor or average credit an ARM can get you a lower rate and the mortgage will boost your score to refinance to a fixed rate you couldn't get before. ARMs have max adjustments as well, so if you anticipate rates increasing more than that, you can get a lower rate than available at the time and in the future.

Bridge loans are less popular now, so you could get an ARM or interest only ARM on a new house and refinance later after selling your old house.

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

#163

Post by peteradio »

giantg2 wrote: post #135
mikeyouse wrote: post #124

Earlier quoted context omitted.

Right, and it ignores interest rates which is the whole point of comparing actual mortgage costs instead of home prices. Same example, $65k salary x 3x to get a home value would be a $200k house. That's a total annual home cost of $11,750 with 2.75% interest rates and $16,200 with 6.5% rates. If they can afford the $16,200 today based on the 3x rule, then surely they could have afforded a $285k house (4.4x gross) las…

Maybe, maybe not. The monthly cost wouldn't be identical due to taxes, difference in down payment (if also following best practices there), insurance, and that ignores potential future repairs (more expensive houses tend to be larger and/or fancier).

Same house should net same taxes even after a value increase, cities/counties have a levy and back calculate the necessary tax to raise it. If your home increased in value, so did your neighbors.

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

#164

Post by extesy »

aschearer wrote: post #104
paulmd wrote: post #100

Earlier quoted context omitted.

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.

You need to account for inflation. Dollar value in 2001 and 2022 is not the same. CPI today is ~295 vs ~175 in 2001, so while nominally today's monthly payment is higher, it is not higher in terms of its purchasing power.

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

#165

Post by [deleted] »

gizmo686 wrote: post #142
paulmd wrote: post #100

Earlier quoted context omitted.

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…

> 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 is not entirely irrational. The median length of hone ownership is about 13 years. With stable value and interest rates, this is not a big issue. People can role their equity into their next home and just pa…

[deleted]

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

#166

Post by aschearer »

extesy wrote: post #164
aschearer wrote: post #104

Earlier quoted context omitted.

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.

You need to account for inflation. Dollar value in 2001 and 2022 is not the same. CPI today is ~295 vs ~175 in 2001, so while nominally today's monthly payment is higher, it is not higher in terms of its purchasing power.

I adjusted for inflation in my numbers above. The median 2001 home cost $180,000 in 2001 dollars. $300,000 in today's dollars. Someone who could purchase a median home in 2001 cannot purchase a median home in 2020 without increasing their monthly cost. Using Google's mortgage calculator and punching in those numbers at 7%:

$1,996 / month in 2001 vs $2,972 / month in 2022

That's in today's dollars, accounting for inflation. Almost 50% more. Feel free to point out an error in my math.

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

#167

Post by xboxnolifes »

reggedtorespond wrote: post #102
Ar-Curunir wrote: post #28

Earlier quoted context omitted.

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.

That $80,000 isn't inflation adjusted. Drop would be more like 40%, not 85%.

But current home prices don't need to drop. The average price needs to drop. That means more housing. Likely ends up meaning some drop or stagnation in current prices, but you don't need to shift down 40% to reach the goal.

Housing in my area is only a little above the 80s price after adjusting for inflation. Of course, the 80s price is nationwide average, while my given price is only the local average.

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

#168

Post by extesy »

aschearer wrote: post #166
extesy wrote: post #164

Earlier quoted context omitted.

You need to account for inflation. Dollar value in 2001 and 2022 is not the same. CPI today is ~295 vs ~175 in 2001, so while nominally today's monthly payment is higher, it is not higher in terms of its purchasing power.

I adjusted for inflation in my numbers above. The median 2001 home cost $180,000 in 2001 dollars. $300,000 in today's dollars. Someone who could purchase a median home in 2001 cannot purchase a median home in 2020 without increasing their monthly cost. Using Google's mortgage calculator and punching in those numbers at 7%: $1,996 / month in 2001 vs $2,972 / month in 2022 That's in today's dollars, accounting for infl…

Didn't know you already inflation-adjusted your numbers. So I looked up the prices, mortgage rates and CPI in 2001 and 2022. I think your math is correct.

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

#169

Post by ProfessorLayton »

lumost wrote: post #78
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…

The economics of housing are weird. Someone who bought the 1MM house at 2.5% still has a payment based on 2.5%. This individual's house might be nominally underwater, but they are still comfortably making payments. If they were to move, then they would lose both the downpayment and their monthly payment would increase. So the best bet for them is to stay put. However this might mean that they put the house up for sal…

It gets even weirder if that person loses their ability to continue to pay their relatively comfortable mortgage and they have to put their house on the market. In this tremulous economy being underwater is still a very uncomfortable place to be, unless one has plenty of cash reserves — which may be unwise to spend on an overvalued asset.

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

#170

Post by seer-zig »

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…

Inflation at work.
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