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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

#71

Post by jobowoo »

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…

How are these firms able to buy at such low rates? I thought these loans were reserved for owner-occupied homes.

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

#72

Post by esotericimpl »

throwaway1777 wrote: post #58
conbandit wrote: post #49

Earlier quoted context omitted.

Minor correction, but you probably mean Blackrock-type firms. Blackwater was a private military company.

Funny picture imagining blackwater kicking down some doors and becoming a landlord

No post body was provided.

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

#73

Post by potatolicious »

powvans wrote: post #56
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 think it's a confluence of a few things... 1) You lock your mortgage rate for 90 days, so 90 days ago rates were significantly lower. These will be rolling off soon and by early next year the prevailing rates will obviously be much higher. 2) People are paying points up front to buy down the interest rate. 3) Jumbo mortgages are still much cheaper than conforming (I think a full point).

Some other key things:

4) Lots of people buying with all-cash or mostly-cash. You're not at all rate-sensitive if you're a cash buyer.

5) A lot of these cash-heavy buyers are powered by generational wealth.

6) The housing shortage in the US is incredibly acute, so much so that the market will continue chugging along even as borrowing conditions worsen considerably. I bought a couple of years ago when the market was red-hot largely because a family-sized property was unrentable - to get anything big enough for my needs there was no choice but to buy. I imagine others are in the same position now.

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

#74

Post by rednerrus »

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?

No one.

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

#75

Post by onlyrealcuzzo »

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...

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

#76

Post by ramesh31 »

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 make a 90th percentile income, and I cannot afford the median (or mean) US home price. Something is seriously wrong.

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

#77

Post by rednerrus »

jeffbee wrote: post #16

Rates were higher than this continuously for 30 years up until about 20 years ago. It really is the recent rates that have been exceptionally low.

No one who owned a house 20 years ago had a 2.75% mortgage rate. That's the difference.

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

#78

Post by lumost »

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 sale, and let it stay for sale for the next 2 years.

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

#79

Post by mizzack »

conbandit wrote: post #49
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…

Minor correction, but you probably mean Blackrock-type firms. Blackwater was a private military company.

Not to be confused with other investment firms Blackstone, Bridgerock, and Bridgewater. Or tire manufacturer Bridgestone, for that matter.

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

#80

Post by hardtke »

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 to a new house). So the people buying now will be buyers that absolutely need to and/or buyers with lots of cash that expect to refinance later. The only people selling now are people that absolutely need to.
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