This is one of a few areas where having an MBA is actually useful. Interest rate risk and how things behave when interest rates are going up are good to know.
You can also learn that by reading a book or two.
Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
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Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#22I'm constantly reminded to be thankful to be a homeowner in America. Most other countries don't even have fixed-rate mortgages and many of my international friends are facing massive unexpected jumps in their monthly housing costs.
In most countries buying a house doesn’t involve taking out loans that take 30 years to pay off in the first place.
I don't know, high house prices are pretty much all over the west
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#23I think he’s trying to say that near-zero interest rates are never coming back which is a sentiment that I think everyone agrees with here. His tone comes off as abrasive, though, and I struggle to want to agree with him.
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#24I'm constantly reminded to be thankful to be a homeowner in America. Most other countries don't even have fixed-rate mortgages and many of my international friends are facing massive unexpected jumps in their monthly housing costs.
In most countries buying a house doesn’t involve taking out loans that take 30 years to pay off in the first place.
What does the process look like in Europe?
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#25Earlier quoted context omitted.
And no prepayment penalties, which means that if interest rates go down, you can refinance.
How does this work in the American economy? Why does anyone buy RMBS at such low yields for 30 years with the capital risk that the money could come back to you if rates move against you?
Simple answer is prepayment risk is baked in into spreads. That is why it is higher than in Europe especially now give the risk of prepayment (in the form of refinance) is probably at all times high
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#26"... for six to 18 months"
>> As of June, there were fewer than 800,000 housing units listed for sale across the country, down from nearly 1 million at this point in 2020, according to Realtor.com. At this point in 2018 and 2019 there were north of 1.2 million homes listed for sale.
>> “For buyers, it’s been a tough go,” said Yun. “Not only have prices not fallen, there’s not much inventory.”
As an active homeowner looking to relocate in Seattle, inventory has not been good this summer.
I'll also say that IMO, the economy has not cooled. Even with all the tech layoffs, banking faults, the US$1M+ houses are still selling quickly. I spoke with a family member in finance, who kept saying a recession was coming. It never did, at least not one I can say that affected the economic landscape.
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#27Another step closer to revolt. There's only so much pressure the general public will be able to handle. History has taught us when there is a massive unbalance in "haves" and "have nots" things don't play out in ways where we just "sit down and discuss what's going on."
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#28This is one of a few areas where having an MBA is actually useful. Interest rate risk and how things behave when interest rates are going up are good to know.
Yet all of the MBAs at Silicon Valley Bank and working for Sand Hill Road VC firms were apparently blindsided this spring, not recognizing the risk and failing to take precautions.
Having huge layoffs when interest rates rise is the precaution. Their revenue didn't drop so the only justification would have to be (playing their cards in the wage increase/work from home tug of war) fear of not making payroll in a couple years if their debt laden customers did less business than before.
(I don't think big tech's revenue is going to drop, to be honest, because so much could happen before it stopped growing.)
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#29I'm constantly reminded to be thankful to be a homeowner in America. Most other countries don't even have fixed-rate mortgages and many of my international friends are facing massive unexpected jumps in their monthly housing costs.
In most countries buying a house doesn’t involve taking out loans that take 30 years to pay off in the first place.
"Most" is probably literally true but I don't see people talking about the cheap housing in European cities like London. Yes, most people have historically taken out 30-year fixed rate loans in the US, in part because they are tax-advantaged. But nothing is keeping you from taking out a loan for a shorter period. I did when I refinanced my current house.
Re: Homebuyers must ‘learn to live’ with near-7% mortgage rates says RE/MAX chairman
#30Earlier quoted context omitted.
In most countries buying a house doesn’t involve taking out loans that take 30 years to pay off in the first place.
What does the process look like in Europe?
Usually an overpriced 30 year ARM (with a fixed period at beginning) and a restriction that you pay it off before retirement (so no 30 year mortgage if you're 45 for instance). Also a much tougher application process where people without "permanent" jobs are screwed. Of course, many, many people are on temporary contracts (because firing perm employees is hard). Possibly a stiff deposit req (I'd need a 20% deposit) and you can only borrow 4x your income. Having kids counts against you too.
At least this is the case in Ireland. I bought my house in cash.