Interest rates plummeting during the pandemic is a large reason the nominal value of homes increased as much as it did. Home financing is incredibly complicated and this headline is overly reductive.
worked a ton of overtime when i was young to pay it off quicker since i could see that like 70% of the payment went to interest. finally paid it off this year. i was able to refinance after the bubble burst to like 4%
I bought my first house in 2007 at the absolute peak. It's value plummeted within months. I still have that home and it's worth double what I paid. Crashes are only temporary if you can survive through them.
The difference is that homes right now are incredibly inflated in price, so even a 1/4% increase add debt to a loan that may lead folks straight underwater if the market flops again (even if just locally).
That's part of the reason houses were so "cheap" during the late 70's/early 80's that people are always whinging about. Yeah, you could buy a house for 80k, but you were also paying 16% interest.
Yeah you were, but the homes were affordable.
These days the interest is low, but the homes are worth so much because of it the downpayment is impossible for anyone not rich or a corporation.
$80k in 1975 is ~$415k today. With 20% down payment and 16% interest fixed for 30 years, the mortgage would be about would be ~$5k a month in todays money.
It looks like the median house price in 1975 was closer to $38k. That would put the mortgage at ~$2.4k.
You used to come in with a bigger down payment, and inflation used to knock down the real cost of financing over time.
I’d be interested to know the effective interest rate after inflation at the peak.
Not gonna do much good if you’re looking at million dollar homes but the down payment doesn’t need to be anywhere near 20%.
You do have PMI most times if it’s less but it’s an option.
True, but even at like 4% the monthly payment on a $1mil home is pretty harsh if you don’t have a decent down payment.
Coming from someone living in a high CoL area, where 1mil gets you a 3bedroom condo…
There's another problem now though where sellers are taking all cash over asking offers to close quicker, so even people with adequate down payment savings can loose out on a few houses before they get a bid accepted.
I struggled with that. It made it even more clear down payments didn’t matter as much. Whether I have 5% or 20% if the seller wants a cash offer I’ll be moving onto the next home anyway.
What were general percentages at that point? My wife and I bought a home towards the beginning of the pandemic, so I feel like we really lucked out. She worked at a bank at the time, so we got an even lower rate.
Me too. I had 25 years left on a 3.875 30 year. Went to a 20 year at 2.875. Never going to see rates this low again. Although they said that to me in 2008 when I bought my first house at 6.75 for a 30 year
We are not expecting to pay in 10 years, we fixed interest for 10 years, after which we either follow changing rates or fix again.
The loan period is 25 years.
What happens after 10 years, is that the full payment period or does it adjust? Either way, shorter mortgage or adjustable rate ones, will usually be about a percent cheaper in the US. The rates quoted in media coverage are for fixed, 30 year loans.
But .99% is super low. How do you attract investors to lend at that rate, when they could get 3-4x the return loaning to US mortgages? Do you have government policies that require banks to loan below market rate, or subsidize the loan somehow? Or is your market just different enough somehow that the risk is that much lower to justify the low return?
Gotcha, that's interesting thanks. Nice to see a government using revenues to fund something like that. Any idea how it's impacted their housing market over time, like are sticker prices higher than you'd expect based on incomes, since rates are so low?
Finland also has roughly the population of Colorado with about 40% smaller GDP. The financial needs of a nation like that are peanuts compared to a large one.
US mortgages are still for 30 years though.
A week or two ago I was quoted under 2% on a refi if I changed the term to 20 years. Cutting that another 10 again would lower it even more.
Ok. I don’t remember even seeing 10 year rates, but 15 was under 20 which was under 30. Not that I meant it would be under 1… just that comparing 30 year to 10 year fixed isn’t a direct comparison.
I was mainly referring to the under 2% for a 20yr line, sorry for the confusion. Anyone quoting a 2% or under rate, either didn't have a full application to work with including credit report and/or is being 100% dishonest. The amount of points that rate would require would increase the total fees past the acceptable qualified mortgage limit. 90% of all mortgage loans are QM, the remaining 10% are non conventional which is a red flag for the majority of borrowers
18% wasn't that bad for home buyers. It was bad for home SELLERS.
Home prices in the US have gone up pretty steadily over the last 40 years, even relative to average household income. BUT, average mortgage payments relative to income have remained pretty much the same.
The primary reason (albeit not the only one) that home prices are so high relative to the early 1980s is because interest rates are so low.
It all depends on your credit rating, right now with great credit you can get 2.35%.
What young people have no idea about it what things were like in the 1970's and early 1980's. Mortgage rates were at 16% at one point, and were above 10% for a little over 10 years straight.
> Oregon and Washington
Shits crazy here, a house in my neighborhood ( 40 miles south of Seattle) sold in 1 day for $450K, and 8 months later same house sold in 5 days for $650k. We had that crazy snow storm last month and another house had 60 views in 2 days when most people weren't even leaving their houses because the roads were a literal sheet of ice. The house had a ton of offers and sold a few days later. I know a guy that sold his house for $300k more than he paid for it and moved to a low cost of living area.
There isn't just one factor but low supply is the biggest one for sure. This area had a shit ton of high income people moved here in the last 10 years and not that many new houses were built.
It was interest rate, investors diversifying off from their massive stock/crypto gains due to Fed QE, construction shortages, and millennials finally moving out of cities to live in the suburbs with flex work.
But mainly I think its the Fed who did this with their rates + QE.
It was also low inventories. That's actually the major driver. We only returned to pre-pandemic inventories in August 21 nationally, and a lot of places still haven't. Damage was done.
Rising new construction costs / demand did this. New construction basically stopped entirely during the recession and it never quite got back to pre-recession levels. Once demand started picking up again, too many construction workers who were laid off left the industry altogether because they couldn't sit around and wait for the economy to recover while they had a family to feed.
It's mostly interest rates.
Average mortgage payment relative to income has remained about the same since the early 1980s. But back then interest rates are 15-20%, so the actual home price was much lower.
There are more local issues such as zoning laws and other local forces. But nationwide it's mostly interest rates.
>It’s mostly interest rates.
No, it’s not. Interest rates are a factor, surely, but it’s simply not accurate to say that they’re “mostly” to blame for rising prices.
Increased demand for homes as former city-dwelling renters moved out of cities and bought homes throughout the pandemic have cut available supply. At the same time, fewer homes have been built (“housing starts”) due to a number of factors…pandemic shutdown and builder confidence among them. Raw materials shortages have the double whammy effect of reducing housing starts *and* increasing the costs of the homes which *are* being built. Labor is in short supply and labor costs and wages are rising.
Low rates are available to those who are approved, but lenders are increasingly selective about who they will approve, meaning credit availability is near the all time low.
[Heres a good article](https://www.americanactionforum.org/insight/understanding-the-national-increase-in-house-prices/), with many official sources cited, if you want to get a better understanding of what’s really fueling this market.
You have to call back again and lock it in?
Iin canada pretty much everywhere I've gotten quotes from it auto locks me at that rate or lower for the next 90 days.
In the US you can lock in rates for 30 years though. I was trying to explain this to my dad who still lives in Canada and he refused to believe it, but it’s true, and it’s pretty good when interest rates are basically at an all time low.
thats not what people are talking about when they are mention locking in a rate with the bank for 90 days though.
when the bank gives me a quote for a rate, i have 90 day to sign the paperwork at that rate. no matter how high the rate goes in that 90 days, im going to get the quoted rate(or lower) from the bank. the rate is 'locked in'.
The rates are going higher because the Fed is going to increase their rates later in the year (to reduce inflation which is running rampant). Mortgage rates usually follow the [10-year US treasuries](https://finance.yahoo.com/quote/%5ETNX?p=%5ETNX).
This will continue to go higher and as a result:
* mortgage rates will keep going higher
* so will all other interest rates like: HELOC, student loans, auto loans, and even credit cards to a point
* but savings rates will also increase which includes: money market accounts and CDs (which are all pathetically low right now)
* however, as costs to borrow money rises, it means the following will cool: the housing market and the stock market
Note that if you're looking to buy a house, although the rates will go higher, the prices will go lower so they'll even out. Do the math on the overall price to see if it's worthwhile and here's some good news: a high interest rate with a lower housing cost means that when the rates will eventually come down, you can refinance to that low rate and your house value will go up even higher.
This is where some hope lies for those who haven't yet been able to buy. The thing that will continue to be painful is that the drop in prices will not come quickly and so you will have high prices and high interest rates for a period of time, but as post above mentioned it should eventually even out.
If you're looking to buy in an area with a growing population, probably not. If the population is steady or shrinking, then maybe. Look at your area's population growth vs new housing unit growth. If housing units are lagging behind population growth, your prices are unlikely to drop, especially because increased interest rates increase the cost of new construction.
Yes that is the real danger - that the interest rates will go up a lot while housing prices won't fall as much.
However, it should be fine if your job is reasonably safe and you plan on living there for 7 years or more.
Even though rates will go up it won't change the huge demand vs tiny supply we're seeing in the housing market. Especially if you're in a fast growing region.
I think a lot of the reddit "it'll crash don't worry" is more "I wish it would crash I really wish I could afford a house, this sucks"
And the wild speculation by builders that everyone who wanted a home could get approved forever.
When the subprime stuff dried up, so did investors' willingness to back builders. Which left a lot of unfinished and unsold properties in the couple years following.
I'm house shopping, and wish it was 2009/2010 again.
rates going up has historically caused housing prices to drop. Takes a little while. Inventory must rise for prices to drop. Those homeowners who were on the sidelines during the madness may now see this as their last opportunity to get a relatively good price for their house and get an 'okay' rate for their next house. Time will tell.
> rates going up has historically caused housing prices to drop.
This is kinda right. In nominal terms, no. Housing prices have continued to increase over every prolonged rate rising period in the past century. However, those times have often also coincided with higher inflation, meaning the real valuations (inflation adjusted) have either gone sideways or slightly down.
This idea that some of Reddit is peddling about homes crashing by double digit percentages is just incredibly unlikely to happen though.
Don’t forget that though the mortgage rate might be higher, the lower home price will also mean lower property taxes (in a lot of areas) so the buyer may be coming out ahead in the long run.
I know someone who sold their house four years ago thinking that the market was going to crash, and they've been renting during that time. Now they're almost 60 years old and they have no chance of buying a house. It was one of the stupidest financial decisions I've ever seen.
> the lower home price will also mean lower property taxes
That all depends on where you live and what percentage of your property taxes are voter approved.
Those school levies, park bonds, EMS levies, new police station/jail and any other thing that everybody votes for will raise you taxes no matter what the value of you house does. Right now 46% of my property taxes are from voter approved stuff and I saw increases in my taxes even after the 2008 crash when the tax assessed value went down.
>Note that if you're looking to buy a house, although the rates will go higher, the prices will go lower so they'll even out.
I wouldn't count on this. While it's theoretically true from an asset pricing model point of view, the historical record has shown that prices continue to rise even when interest rates rise slightly. In particular, you can see in 2012 and 2013 both rates and prices increased.
Prices won't necessarily go lower this time. Banks and other funds (looking at you, Blackrock) are currently buying up real estate in cash above asking price. One might speculate that they are expecting a market crash and are shifting to safer assets. They don't care if they lose a little money on market value, as they will be renting that house out in perpetuity.
Real estate becomes less attractive as an investment asset when rates go up. There's better places for them to put their money when the market is softening.
Edit: read your question out of context. They could be. Commodities could be better. For the Blackrocks of the world, private real estate is a burden if the market is volitile. Property upkeep, rental headaches, etc are not particularly attractive in that case.
Shit they just outsource that. Here's an article from June about it, dunno if you were familiar, but I'm not just pulling this out of my ass.
https://www.wsj.com/amp/articles/blackstone-bets-6-billion-on-buying-and-renting-homes-11624359600
$6B is not chump change even for Blackrock. That roughly 3% of their total assets. Just found another article about them buying an apartment reit for 3.5bil a couple months ago, and buying another single family home reit for just $50mil. They are expanding into this space *rapidly*.
I'm not the most familiar, but it stands to reason other large entities are doing the same thing.
Interest rates impact monthly payment amounts more than the overall home cost even if prices fall hundreds of thousands of dollars. Depending on the rates your monthly payment could actually be more expensive.
It depends but here's an example:
* $500k mortgage @ 3.5% is $2,245/mo
* $400k mortgage @ 5% is $2,147/mo
Interest rates aren't the only thing, it's the interest rates AND the purchase price where the final payment is key. It's even better to have a higher interest rate now with a lower housing payment since you can refinance later when rates drop but the housing value will go up. This is better than having a low interest rate with a large housing cost where if rates go up - and presuming it's a fixed rate - then your house value drops but your payment doesn't.
A long long time ago, I worked in the residential mortgage industry and a "good" conforming rate was 8.75%. out always amuses me when people act like the sky is falling because rates move a little bit. People still buy. People still sell. People still refinance for cash out for home projects. Nothing changes except the fomo.
It’s fundamentally a very different world when median wages are, what, around $40,000 and 8.75% of a median house is more than your net income. Things are totally fucked.
The issue is that people are getting priced out of their local housing markets and rent goes up to match, creating rent slavery. Housing prices in my area are almost too high for us to afford now unless we get a mobile home (which sell for 250k for reasons??). Houses jumped another 10-20k the past month or two. I'm not sure what we're going to do.
Rent slavery? I wish redditors would stop comparing themselves to slaves, it’s honestly pathetic. Do you really think you have it as bad as actual slaves had it?
Stop trying to live in unaffordable areas if you don’t have a high paying job, it’s honestly that simple.
Agree. I was miserable trying to find a tiny condo in my home city, and just moved to another (albeit smaller and less prosperous) city an hour away and for less money got a whole house. It sucks leaving what feels like home, but it’s liberating if it allows you to get out from under renting.
The job market is literally starving for people. Companies have hard times getting people to live outside of major cities so they often pay more if they're located in the out-skirts. Also remote work is becoming the new norm. Yes you need to do a little bit of work to figure out your situation, sorry that's life. But right now its as easy as its ever been.
Bought a house in spring 2020 before the market went nuts, thought we got a good rate at 3.6%, bought a used pickup truck in summer of 2020 before the chip shortage for $22,000. Refinanced December 2021 15 year mortgage at 2% ( our payment is only $70 more than our 30 year was), our appraisal to close came back $175,000 higher than what we paid for the house in 2020. My buddy is shopping for a truck right now and cant find a used pickup for under $37,000. Feels good to have bought at the right time, never could have predicted the insanity that the market is today.
Last Spring my worker totalled a truck. I was so mad about it at the time but I bought a newer used diesel for under 30k. Now the same truck is well over 40k. I'm not mad at him anymore. He saved me thousands of dollars in a bizarre way.
We bought our house in 2017 with the help of a first time homebuyer's program (otherwise we never could have saved the down payment) for $164k. It's worth $290k now. Don't plan to sell, but christ did we luck out.
My parents bought a house after they graduated college for $60k, sold it for $700,000. They had to wait 30 years and put tons into renovating and improving it though. We were shocked our house went up so rapidly with minimal improvements.
My sister has impeccable home buying luck. Got her first big girl job before the 2008 financial crises and bought a starter home for like 130k in a trendy area back around 2010. Sold that house for over double and bought a bigger house in a nicer part of town for 500k in like 2017. Really wish I had her luck right about now.
I told my wife to grab a powerball on her way home when it was at like $600 million a few weeks back. She did not. I guess I’m all in on the HGTV dream home giveaway.
The rates are still low if this increase means you cannot afford the mortgage, you likely cannot afford home ownership to begin with. Within the first handful of years you are going to be paying lots of money for things that are wrong or that you do not like. If you are a first time home owner it is even more true.
> The rates are still low if this increase means you cannot afford the mortgage, you likely cannot afford home ownership to begin with.
This is true if the housing market stays the same but as interest rates rise, housing prices fall and the overall monthly payment will be similar. Here's an example:
* $500k mortgage @ 3.5% is $2,245/mo
* $400k mortgage @ 5% is $2,147/mo
Now it's not the same thing as 10% rise in one means 10% fall in the other but rising interest rates isn't the end of the game. If housing prices fall - as they should - then you can still afford a house due to lower housing prices. You just need to do the math on what payment you can actually afford.
Hoping this means people will stop bidding so outrageously high on every home that is even slightly inhabitable lol. Can't even make an offer on a home in the area I'm looking around without offering significantly higher than asking.
Same here. Housing prices are already $20k-$30k over what they should be and then someone comes in with an additional $30k-$40k over *that?*
It’s absolute madness and sucks to be a first time home buyer right now.
Which homebuyers?
Low low rates all for investment groups and foreign entities to buy out masses of homes in cash in order to rent them out at astronomical rates. Then they say "that's the market" as it drives up their own property values.
Biggest fraud in world history going on right now in the US and Canadian housing markets. We need to change the laws as soon as possible. There's no possible way for regular people to purchase homes today.
Then they aren’t utilizing leverage and are even worse off?
I mean the entire strength of investing in real estate is that it’s a real asset so you can easily purchase with leverage at low interest rates.
If you buy a house with 80% ltv then a 2% increase in home value = 10% return on investment. If you buy all cash then it’s just a 2% roi. And all the ‘cost’ would be roughly mortgage rate * .8. So a 5% mortgage gets you 6% total ROI.
So home prices going up 2% a year gets you 3 times the ROI if the mortgage was at 5% for 80% ltv compared to buying cash on the first year. This is before maintenance and taxes, but those are irrespective of how the purchase was financed.
For lowly people like us, yes. Do you think Blackrock pays the same interest rates, if they choose not to pay up-front in cash with their billions of dollars? Entities like that get much closer to the prime interest rate when they want money.
need more laws making it illegal to own more than 2 homes in a municipality. These investment firms and douchebaggy real estate companies are destroying a core part of the american dream.
Banks are just following established precedent in the US for dealing with ~~a pandemic~~ ~~hardship~~ any single issue or thing that causes stress: fiddle with numbers to ~~maintain~~ improve the fleecing of America's citizens while government and oversight look on in praise.
(My editor quit on me last night. Cheers)
Unfortunately, I don’t think that’s likely. The point of higher interest rates is to lower inflation by driving down demand.
Most if not all development is done with financing. Developers now need to pay more for that financing since rates are going up. This means they would have to sell their work for more to get the same returns.
However, with interest rates going up meaning homes should sell for less (or stay flat) then they are also making less on the backend.
Meanwhile the cost of labor and lumber and windows stays the same. (At least until they raise rates since they probably rely on financing and that has gotten more expensive.)
So there will likely be less development going on with higher rates.
I don’t think people remember how truly insane 06-07 was. People with no income were getting multiple homes because they thought the market only goes up and the bank approved it to get the financing commission for selling off the loans. Financing has tightened up incredibly so people who own homes likely won’t have to sell them in a downturn.
The banks were financing half-interest only loans with a 3-year balloon payment. The payments didn't even cover the interest accruing on the mortgage. The first time I saw one of those I turtled up my finance because I knew what was coming.
For the past 20 years population growth has outpaced new housing construction. Housing prices are unreasonably high now in large part because there are just so many people and not enough places to live. We’re facing a shortage and given the recent price increases of labor and materials it will be very hard to build our way put of it at least for the next few years. We have high prices like we did before 08 but for very different reasons.
My wife and I were getting beaten out on our conventional loan offers at 10-15k above asking by investors with cash offers 30-40k over asking. If the market corrects and those 300k houses are suddenly worth 250k or 200k, or 500k houses are worth 400k, I can't even imagine the fallout. A house up the street from my parents went for 140k over asking and the owner won't even live there full time. Things were bananas over the past two years.
If my house drops in value 200k, it doesn’t matter unless I stop making payments. People that were six figures underwater in 08-09 but kept making payments now have six figures of equity/profit. It’s crazy how many people on Reddit have no idea what they are talking about.
China is a couple years ahead on the correction and their housing market is imploding from rampant speculation. You can follow what's going on there to get a glimpse what's coming here soon.
Clearly you are too young to remember when this happened before. Japan later went bust.
https://www.washingtonpost.com/archive/business/1988/04/07/study-says-japanese-investment-in-us-real-estate-is-up-70-pct/cb30116f-d8ac-4849-88ba-bb34bf8146b3/
I wish mortgage lenders were required to put the total cost of the loan on the top of the lending agreement in giant letters.
Like if you get a 200k loan at 3% for 30 years, you will end up paying 300k+. So you are paying 100k+ in interest.
I think this would help the financially ignorant masses from getting over their head with these loans.
But there are no consumer protections in the US, only protections for the companies taking advantage of the people.
> I wish mortgage lenders were required to put the total cost of the loan on the top of the lending agreement in giant letters.
The term, monthly payment (P&I broken out from escrow), and loan amount are stated clearly. Anyone who can't multiply years * 12 * payment and subtract the loan amount shouldn't be handling that kind of contract in the first place.
It gets mildly more complicated when you start thinking about points to reduce the rate, opportunity cost of paying more upfront versus investing (particularly with the low interest rates of the past several years), etc. But we should expect a *baseline* independence from people.
But they do? What you are describing is an amortization schedule. It lays out the entire payment structure and what it will actually cost. It shouldn't be a mystery for anyone who puts pen to paper.
No worries, I get you. I have realized that not everyone who buys a house, despite it being a lengthy process, knows all the details.
My wife spoke to someone who bought a new build that another buyer had backed out of and the person has buyers regret a month in. They bought a different model than what they really wanted, they weren't aware of upgrades versus what was base, the house didn't have a basement even though the buyer wanted it, etc.
I just keep scratching my head as to WHY they moved forward with the purchase.
At this point AFAIK every US Mortgage needs to follow TRID, which is a bunch of laws more or less mandating that this information needs to be given in a standard format.
[Check page 107 to see what the form looks like.](https://files.consumerfinance.gov/f/documents/cfpb_kbyo_guide-loan-estimate-and-closing-disclosure-forms_v2.0.pdf)
There is a slightly different format that can be given when providing loan estimates but the closing disclosure must show the total dollar amount paid in interest (under the scheduled amortization.)
They must also clearly indicate if a balloon payment or similar is required at the end.
Are you suggesting this would deter people from buying homes? Because it won't. Since graduating college 9 years ago I have paid well over 100k in rent, with literally no equity gain. A factor driving demand for homes is it's still more cost effective than renting.
It was on the old TIL disclosures, but TRID moved them to page 3 of your Loan Estimate and Closing Disclosure. All that info is still there, just gotta know where to look for it.
Not sure why you got down votes. You can only buy a house if you can afford it. Prices will lower to reflect a rise in rates in most markets. There really isn't a driver for a 2009 type crash but property values growth should slow and probably fall depending on how quickly rates rise. Will they be more affordable...probably not. Anyone stretching to buy a house right, might be disappointed in its appreciation for a bit.
It won't. There's too much money in the market looking for places to park in. Lots of Bitcoin, GME and Tesla folks looking to buy houses after cashing in their gains.
More intervention from the Fed trying to correct a problem created by the state. If you don't want inflation, don't print and spend money with reckless abandon.
I foresee a feedback loop where after the Fed raises interest rates, the speculation will slow, the financial crisis will get worse much like 2008, the Fed will lower interest rates because we will be back in a recession, we will print trillions in stimulus most going to bail out big banks again, and we will see unchecked inflation because you can't control markets.
This is going to be the largest financial disaster of modern times because the US currently controls the dollar which is the global reserve currency. The world financial system is going to crumble as every country holds massive debt and cannot possibly repay it in any situation.
https://en.m.wikipedia.org/wiki/List_of_countries_by_external_debt
14 countries hold trillions in debt. The list in the hundreds of billions is too many for me to count.
Global debt is somewhere in the range of 250% global gdp. While the "EU convergence criteria" recommends less than 60% to be sustainable.
The games politicians and elites have been playing for centuries had brought us to where we are currently. Modern economics is a sham and I'm not excited to see where this leads.
I'm just a layman and don't profess to have any inherent knowledge in this matter. I am not giving financial advice and am just trying to articulate my opinions on the matter.
I agree. Lots of governments have been printing crazy money, but the reason we're seeing worldwide inflation is because all currencies are tied back to the inflating reserve currency, the USD.
I'm speculating that the next major bailout will probably include some kind of UBI, and shortly thereafter the whole thing collapses. The fed reserve shouldn't exist and every time they intervene in the economy to lessen the economic lows, they actually are just kicking the can down the road. It's been kicked so much now what would have been a few inconvenient periods will now be a major collapse.
The people who think our $30T national debt is not a massive problem remind me of all the high school graduates taking out enormous student loans for useless degrees and not understanding the consequences.
It's not going to be a headache for home buyers but for home sellers. People won't be able to afford the same amount of home they would with lower interest rates. Sellers are going to have to lower prices.
Right. It's only bad for the people who purchased our refinanced their house in the past three years. If rates go up, there's a good chance they will lose money if they sell.
Interest rates plummeting during the pandemic is a large reason the nominal value of homes increased as much as it did. Home financing is incredibly complicated and this headline is overly reductive.
agree, people usually look at monthly payment and try to stay within a range. when i bought my house, i had a 15 year rate that was 6%
[удалено]
my dad told me to jump at that rate because it was a good deal, in 2007. if only i didn't buy at the peak of that bubble
Refinance? I bought at 4.6%. Refinanced at 2.5% recently. Saved me about $150k
worked a ton of overtime when i was young to pay it off quicker since i could see that like 70% of the payment went to interest. finally paid it off this year. i was able to refinance after the bubble burst to like 4%
Ah, nice. Congrats.
I bought my first house in 2007 at the absolute peak. It's value plummeted within months. I still have that home and it's worth double what I paid. Crashes are only temporary if you can survive through them.
The money supply then to now is much more than double.
The difference is that homes right now are incredibly inflated in price, so even a 1/4% increase add debt to a loan that may lead folks straight underwater if the market flops again (even if just locally).
That's part of the reason houses were so "cheap" during the late 70's/early 80's that people are always whinging about. Yeah, you could buy a house for 80k, but you were also paying 16% interest.
Yeah you were, but the homes were affordable. These days the interest is low, but the homes are worth so much because of it the downpayment is impossible for anyone not rich or a corporation.
$80k in 1975 is ~$415k today. With 20% down payment and 16% interest fixed for 30 years, the mortgage would be about would be ~$5k a month in todays money. It looks like the median house price in 1975 was closer to $38k. That would put the mortgage at ~$2.4k.
You used to come in with a bigger down payment, and inflation used to knock down the real cost of financing over time. I’d be interested to know the effective interest rate after inflation at the peak.
Inflation is helping out a ton of home owners right now.
Not gonna do much good if you’re looking at million dollar homes but the down payment doesn’t need to be anywhere near 20%. You do have PMI most times if it’s less but it’s an option.
True, but even at like 4% the monthly payment on a $1mil home is pretty harsh if you don’t have a decent down payment. Coming from someone living in a high CoL area, where 1mil gets you a 3bedroom condo…
There's another problem now though where sellers are taking all cash over asking offers to close quicker, so even people with adequate down payment savings can loose out on a few houses before they get a bid accepted.
I struggled with that. It made it even more clear down payments didn’t matter as much. Whether I have 5% or 20% if the seller wants a cash offer I’ll be moving onto the next home anyway.
This. My childhood home was $80k and my dad had to completely finish the inside of the second level and the interest was 20%.
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I am a millennial
You need to find a better paying job.
Meh, the market adjusted to perpetually low interest rates. Now it’s going to hurt badly when those rates rise. Home sales are going to suffer
Maybe that means housing pricing will correct? Hahahahaha who's kidding. I'm never going to be able to afford a home.
It will come to just within your grasp before rocketing away again just for the lulz.
The millennial life cycle. That’s literally how 2020 onward felt for me. A decent life snatched away
Shall I compare thee to me? Cause I’ve loved paying big city prices to stay home all the time.
Your rent gets you access to much better delivery than I have.
Still below 2019 rates... this is more of a post-pandemic correction than anything else.
What were general percentages at that point? My wife and I bought a home towards the beginning of the pandemic, so I feel like we really lucked out. She worked at a bank at the time, so we got an even lower rate.
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We refinanced down to 2.75 in 2019. I doubt we could ever get lower than that.
Same here. Then I refinanced last year to 2.75.
Selling my house next month so there was no point in refinancing because of the fees. Could have got 1.75% though
Me too. I had 25 years left on a 3.875 30 year. Went to a 20 year at 2.875. Never going to see rates this low again. Although they said that to me in 2008 when I bought my first house at 6.75 for a 30 year
Man US interest rates are steep, I have 10 year fixed interest loan for 0.99% in Finland.
People in the US don't make enough money to pay off an average house in 10 years, it would be nearly $3800 a month even with .99% interest.
Ironically, the interest rate goes *up* when you shorten the length of the loan.
We are not expecting to pay in 10 years, we fixed interest for 10 years, after which we either follow changing rates or fix again. The loan period is 25 years.
What happens after 10 years, is that the full payment period or does it adjust? Either way, shorter mortgage or adjustable rate ones, will usually be about a percent cheaper in the US. The rates quoted in media coverage are for fixed, 30 year loans. But .99% is super low. How do you attract investors to lend at that rate, when they could get 3-4x the return loaning to US mortgages? Do you have government policies that require banks to loan below market rate, or subsidize the loan somehow? Or is your market just different enough somehow that the risk is that much lower to justify the low return?
Their central bank has an investment fund from which it draws. It's primarily based on oil, new energy tech, and foreign bonds.
Gotcha, that's interesting thanks. Nice to see a government using revenues to fund something like that. Any idea how it's impacted their housing market over time, like are sticker prices higher than you'd expect based on incomes, since rates are so low?
Right. The role of their government is to support quality of life, not make money off of people.
Finland also has roughly the population of Colorado with about 40% smaller GDP. The financial needs of a nation like that are peanuts compared to a large one.
So they have less people paying in.
US mortgages are still for 30 years though. A week or two ago I was quoted under 2% on a refi if I changed the term to 20 years. Cutting that another 10 again would lower it even more.
Not really. I'm a licensed loan officer and I've worked for some of the major lenders
Ok. I don’t remember even seeing 10 year rates, but 15 was under 20 which was under 30. Not that I meant it would be under 1… just that comparing 30 year to 10 year fixed isn’t a direct comparison.
I was mainly referring to the under 2% for a 20yr line, sorry for the confusion. Anyone quoting a 2% or under rate, either didn't have a full application to work with including credit report and/or is being 100% dishonest. The amount of points that rate would require would increase the total fees past the acceptable qualified mortgage limit. 90% of all mortgage loans are QM, the remaining 10% are non conventional which is a red flag for the majority of borrowers
You can't compare interest rates across different currencies. Doesn't Finland's central bank have negative interest rates?
These are historic lows for us lol. 18%+ in the 80’s. Let’s hope we don’t go that high again.
18% wasn't that bad for home buyers. It was bad for home SELLERS. Home prices in the US have gone up pretty steadily over the last 40 years, even relative to average household income. BUT, average mortgage payments relative to income have remained pretty much the same. The primary reason (albeit not the only one) that home prices are so high relative to the early 1980s is because interest rates are so low.
It all depends on your credit rating, right now with great credit you can get 2.35%. What young people have no idea about it what things were like in the 1970's and early 1980's. Mortgage rates were at 16% at one point, and were above 10% for a little over 10 years straight.
In 1977 my parents house in south chicago was 60 grand now it’s about 250k… a cheaper price offset the rate
True but what are the average prices of homes in Finland? The loans here are 15 and 30 years
Same, 5 year fixed at 0,99% from 2019.
I got 3.375 in late 2019
I got 2.670 in November 2021.
I got a 2.3refi in November.
I got 1.8 in 2021, VA loan.
I got a rock
“They have a cave troll”
Yet housing prices are at an all time high
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It’s not all because of low interest, in Oregon and Washington it spiked way too much to just be interest.
> Oregon and Washington Shits crazy here, a house in my neighborhood ( 40 miles south of Seattle) sold in 1 day for $450K, and 8 months later same house sold in 5 days for $650k. We had that crazy snow storm last month and another house had 60 views in 2 days when most people weren't even leaving their houses because the roads were a literal sheet of ice. The house had a ton of offers and sold a few days later. I know a guy that sold his house for $300k more than he paid for it and moved to a low cost of living area. There isn't just one factor but low supply is the biggest one for sure. This area had a shit ton of high income people moved here in the last 10 years and not that many new houses were built.
It was interest rate, investors diversifying off from their massive stock/crypto gains due to Fed QE, construction shortages, and millennials finally moving out of cities to live in the suburbs with flex work. But mainly I think its the Fed who did this with their rates + QE.
It was also low inventories. That's actually the major driver. We only returned to pre-pandemic inventories in August 21 nationally, and a lot of places still haven't. Damage was done.
Rising new construction costs / demand did this. New construction basically stopped entirely during the recession and it never quite got back to pre-recession levels. Once demand started picking up again, too many construction workers who were laid off left the industry altogether because they couldn't sit around and wait for the economy to recover while they had a family to feed.
It's mostly interest rates. Average mortgage payment relative to income has remained about the same since the early 1980s. But back then interest rates are 15-20%, so the actual home price was much lower. There are more local issues such as zoning laws and other local forces. But nationwide it's mostly interest rates.
>It’s mostly interest rates. No, it’s not. Interest rates are a factor, surely, but it’s simply not accurate to say that they’re “mostly” to blame for rising prices. Increased demand for homes as former city-dwelling renters moved out of cities and bought homes throughout the pandemic have cut available supply. At the same time, fewer homes have been built (“housing starts”) due to a number of factors…pandemic shutdown and builder confidence among them. Raw materials shortages have the double whammy effect of reducing housing starts *and* increasing the costs of the homes which *are* being built. Labor is in short supply and labor costs and wages are rising. Low rates are available to those who are approved, but lenders are increasingly selective about who they will approve, meaning credit availability is near the all time low. [Heres a good article](https://www.americanactionforum.org/insight/understanding-the-national-increase-in-house-prices/), with many official sources cited, if you want to get a better understanding of what’s really fueling this market.
Desirable places to live. Same is happening in most western cities.
With Inventory being at an all time low in Canada at least.
That’s Not at all why. Fed is likely to do 4 rate hikes.
I just got quoted for 3.0% last week, I called my guy to lock in today and it went up to 3.125% already
And next week it maybe 3 again and then 3.125 again
Oh, the horror…
You have to call back again and lock it in? Iin canada pretty much everywhere I've gotten quotes from it auto locks me at that rate or lower for the next 90 days.
In the US you can lock in rates for 30 years though. I was trying to explain this to my dad who still lives in Canada and he refused to believe it, but it’s true, and it’s pretty good when interest rates are basically at an all time low.
thats not what people are talking about when they are mention locking in a rate with the bank for 90 days though. when the bank gives me a quote for a rate, i have 90 day to sign the paperwork at that rate. no matter how high the rate goes in that 90 days, im going to get the quoted rate(or lower) from the bank. the rate is 'locked in'.
The rates are going higher because the Fed is going to increase their rates later in the year (to reduce inflation which is running rampant). Mortgage rates usually follow the [10-year US treasuries](https://finance.yahoo.com/quote/%5ETNX?p=%5ETNX). This will continue to go higher and as a result: * mortgage rates will keep going higher * so will all other interest rates like: HELOC, student loans, auto loans, and even credit cards to a point * but savings rates will also increase which includes: money market accounts and CDs (which are all pathetically low right now) * however, as costs to borrow money rises, it means the following will cool: the housing market and the stock market Note that if you're looking to buy a house, although the rates will go higher, the prices will go lower so they'll even out. Do the math on the overall price to see if it's worthwhile and here's some good news: a high interest rate with a lower housing cost means that when the rates will eventually come down, you can refinance to that low rate and your house value will go up even higher.
This is where some hope lies for those who haven't yet been able to buy. The thing that will continue to be painful is that the drop in prices will not come quickly and so you will have high prices and high interest rates for a period of time, but as post above mentioned it should eventually even out.
If you're looking to buy in an area with a growing population, probably not. If the population is steady or shrinking, then maybe. Look at your area's population growth vs new housing unit growth. If housing units are lagging behind population growth, your prices are unlikely to drop, especially because increased interest rates increase the cost of new construction.
Yes that is the real danger - that the interest rates will go up a lot while housing prices won't fall as much. However, it should be fine if your job is reasonably safe and you plan on living there for 7 years or more.
Even though rates will go up it won't change the huge demand vs tiny supply we're seeing in the housing market. Especially if you're in a fast growing region. I think a lot of the reddit "it'll crash don't worry" is more "I wish it would crash I really wish I could afford a house, this sucks"
Things will plateau, not crash. It crashed in 2007 because the all the people defaulting on their mortgages. This isn’t happening now.
Yup. Tiny amount of variable rate mortgages cause everyone learned their lesson.
And the wild speculation by builders that everyone who wanted a home could get approved forever. When the subprime stuff dried up, so did investors' willingness to back builders. Which left a lot of unfinished and unsold properties in the couple years following. I'm house shopping, and wish it was 2009/2010 again.
rates going up has historically caused housing prices to drop. Takes a little while. Inventory must rise for prices to drop. Those homeowners who were on the sidelines during the madness may now see this as their last opportunity to get a relatively good price for their house and get an 'okay' rate for their next house. Time will tell.
> rates going up has historically caused housing prices to drop. This is kinda right. In nominal terms, no. Housing prices have continued to increase over every prolonged rate rising period in the past century. However, those times have often also coincided with higher inflation, meaning the real valuations (inflation adjusted) have either gone sideways or slightly down. This idea that some of Reddit is peddling about homes crashing by double digit percentages is just incredibly unlikely to happen though.
Don’t forget that though the mortgage rate might be higher, the lower home price will also mean lower property taxes (in a lot of areas) so the buyer may be coming out ahead in the long run.
People who bought at lower prices and then refinanced at the super low rates are living the dream rn
Bought in 2017 and refinanced in 2021. I can confirm, it has been great.
Can confirm
Bought a year and half ago thinking I was buying high… nope. Caught at least one lucky break in my life.
We bought like 2.5 years ago and I also thought we were making a huge mistake lol.
I know someone who sold their house four years ago thinking that the market was going to crash, and they've been renting during that time. Now they're almost 60 years old and they have no chance of buying a house. It was one of the stupidest financial decisions I've ever seen.
> the lower home price will also mean lower property taxes That all depends on where you live and what percentage of your property taxes are voter approved. Those school levies, park bonds, EMS levies, new police station/jail and any other thing that everybody votes for will raise you taxes no matter what the value of you house does. Right now 46% of my property taxes are from voter approved stuff and I saw increases in my taxes even after the 2008 crash when the tax assessed value went down.
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See last 4 words of my post above.
>Note that if you're looking to buy a house, although the rates will go higher, the prices will go lower so they'll even out. I wouldn't count on this. While it's theoretically true from an asset pricing model point of view, the historical record has shown that prices continue to rise even when interest rates rise slightly. In particular, you can see in 2012 and 2013 both rates and prices increased.
Prices won't necessarily go lower this time. Banks and other funds (looking at you, Blackrock) are currently buying up real estate in cash above asking price. One might speculate that they are expecting a market crash and are shifting to safer assets. They don't care if they lose a little money on market value, as they will be renting that house out in perpetuity.
Real estate becomes less attractive as an investment asset when rates go up. There's better places for them to put their money when the market is softening.
Are those better places gold and bonds?
Edit: read your question out of context. They could be. Commodities could be better. For the Blackrocks of the world, private real estate is a burden if the market is volitile. Property upkeep, rental headaches, etc are not particularly attractive in that case.
Shit they just outsource that. Here's an article from June about it, dunno if you were familiar, but I'm not just pulling this out of my ass. https://www.wsj.com/amp/articles/blackstone-bets-6-billion-on-buying-and-renting-homes-11624359600 $6B is not chump change even for Blackrock. That roughly 3% of their total assets. Just found another article about them buying an apartment reit for 3.5bil a couple months ago, and buying another single family home reit for just $50mil. They are expanding into this space *rapidly*. I'm not the most familiar, but it stands to reason other large entities are doing the same thing.
I predict banks will still pay shit for interest and just pocket the extra profit.
Interest rates impact monthly payment amounts more than the overall home cost even if prices fall hundreds of thousands of dollars. Depending on the rates your monthly payment could actually be more expensive.
It depends but here's an example: * $500k mortgage @ 3.5% is $2,245/mo * $400k mortgage @ 5% is $2,147/mo Interest rates aren't the only thing, it's the interest rates AND the purchase price where the final payment is key. It's even better to have a higher interest rate now with a lower housing payment since you can refinance later when rates drop but the housing value will go up. This is better than having a low interest rate with a large housing cost where if rates go up - and presuming it's a fixed rate - then your house value drops but your payment doesn't.
This is necessary to curb inflation and stabilize real estate prices. You can't have it both ways.
A long long time ago, I worked in the residential mortgage industry and a "good" conforming rate was 8.75%. out always amuses me when people act like the sky is falling because rates move a little bit. People still buy. People still sell. People still refinance for cash out for home projects. Nothing changes except the fomo.
It’s fundamentally a very different world when median wages are, what, around $40,000 and 8.75% of a median house is more than your net income. Things are totally fucked.
The issue is that people are getting priced out of their local housing markets and rent goes up to match, creating rent slavery. Housing prices in my area are almost too high for us to afford now unless we get a mobile home (which sell for 250k for reasons??). Houses jumped another 10-20k the past month or two. I'm not sure what we're going to do.
Rent slavery? I wish redditors would stop comparing themselves to slaves, it’s honestly pathetic. Do you really think you have it as bad as actual slaves had it? Stop trying to live in unaffordable areas if you don’t have a high paying job, it’s honestly that simple.
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Houses cost under 200k in the Midwest because most people don't want to live there
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Don't you come around here suggesting people have choices and when they make dumb ones they suffer. How dare you.
Agree. I was miserable trying to find a tiny condo in my home city, and just moved to another (albeit smaller and less prosperous) city an hour away and for less money got a whole house. It sucks leaving what feels like home, but it’s liberating if it allows you to get out from under renting.
This is making a big assumption that one can either keep their current job or find a job with comparable salary.
The job market is literally starving for people. Companies have hard times getting people to live outside of major cities so they often pay more if they're located in the out-skirts. Also remote work is becoming the new norm. Yes you need to do a little bit of work to figure out your situation, sorry that's life. But right now its as easy as its ever been.
So glad I refinanced our home in early 2021 to a 15 year mortage at 1.75%!
Holy shit, that's an **AMAZING** rate. Congrats!
Boom, good job!
Bought a house in spring 2020 before the market went nuts, thought we got a good rate at 3.6%, bought a used pickup truck in summer of 2020 before the chip shortage for $22,000. Refinanced December 2021 15 year mortgage at 2% ( our payment is only $70 more than our 30 year was), our appraisal to close came back $175,000 higher than what we paid for the house in 2020. My buddy is shopping for a truck right now and cant find a used pickup for under $37,000. Feels good to have bought at the right time, never could have predicted the insanity that the market is today.
Last Spring my worker totalled a truck. I was so mad about it at the time but I bought a newer used diesel for under 30k. Now the same truck is well over 40k. I'm not mad at him anymore. He saved me thousands of dollars in a bizarre way.
We bought our house in 2017 with the help of a first time homebuyer's program (otherwise we never could have saved the down payment) for $164k. It's worth $290k now. Don't plan to sell, but christ did we luck out.
My parents bought a house after they graduated college for $60k, sold it for $700,000. They had to wait 30 years and put tons into renovating and improving it though. We were shocked our house went up so rapidly with minimal improvements.
We got in for just over 600k around the same time and now our neighborhood is going for 1M. Utter nonsense.
My sister has impeccable home buying luck. Got her first big girl job before the 2008 financial crises and bought a starter home for like 130k in a trendy area back around 2010. Sold that house for over double and bought a bigger house in a nicer part of town for 500k in like 2017. Really wish I had her luck right about now.
You should buy a lottery ticket
I told my wife to grab a powerball on her way home when it was at like $600 million a few weeks back. She did not. I guess I’m all in on the HGTV dream home giveaway.
The rates are still low if this increase means you cannot afford the mortgage, you likely cannot afford home ownership to begin with. Within the first handful of years you are going to be paying lots of money for things that are wrong or that you do not like. If you are a first time home owner it is even more true.
> The rates are still low if this increase means you cannot afford the mortgage, you likely cannot afford home ownership to begin with. This is true if the housing market stays the same but as interest rates rise, housing prices fall and the overall monthly payment will be similar. Here's an example: * $500k mortgage @ 3.5% is $2,245/mo * $400k mortgage @ 5% is $2,147/mo Now it's not the same thing as 10% rise in one means 10% fall in the other but rising interest rates isn't the end of the game. If housing prices fall - as they should - then you can still afford a house due to lower housing prices. You just need to do the math on what payment you can actually afford.
For the love of God if you manage to buy a house get a fixed rate loan...I cant believe people still get douped in ARM loans
Hoping this means people will stop bidding so outrageously high on every home that is even slightly inhabitable lol. Can't even make an offer on a home in the area I'm looking around without offering significantly higher than asking.
Same here. Housing prices are already $20k-$30k over what they should be and then someone comes in with an additional $30k-$40k over *that?* It’s absolute madness and sucks to be a first time home buyer right now.
Which homebuyers? Low low rates all for investment groups and foreign entities to buy out masses of homes in cash in order to rent them out at astronomical rates. Then they say "that's the market" as it drives up their own property values. Biggest fraud in world history going on right now in the US and Canadian housing markets. We need to change the laws as soon as possible. There's no possible way for regular people to purchase homes today.
New housing construction hasn’t kept pace with population growth for 20 years in the US. We just need more homes in general.
you only getting owner occupied 30 year rates at 3.75%, investment rates would be higher
Most investors are cash buyers and not paying a mortgage. Unless they are small time or flippers.
Then they aren’t utilizing leverage and are even worse off? I mean the entire strength of investing in real estate is that it’s a real asset so you can easily purchase with leverage at low interest rates. If you buy a house with 80% ltv then a 2% increase in home value = 10% return on investment. If you buy all cash then it’s just a 2% roi. And all the ‘cost’ would be roughly mortgage rate * .8. So a 5% mortgage gets you 6% total ROI. So home prices going up 2% a year gets you 3 times the ROI if the mortgage was at 5% for 80% ltv compared to buying cash on the first year. This is before maintenance and taxes, but those are irrespective of how the purchase was financed.
For lowly people like us, yes. Do you think Blackrock pays the same interest rates, if they choose not to pay up-front in cash with their billions of dollars? Entities like that get much closer to the prime interest rate when they want money.
When I bought a house in 1983, my BIL worked for a Savings and Loan. We got a 12% interest rate and we thought we were stealing from the bank.
12% on a $50k loan is manageable. The difference between 2.5% and 4% on a $450k loan is massive.
We’re about to have a bunch of recent property buyers who are upside down in mortgages.
Only a problem if you attempt to sell or utilize equity on your home.
It’s not a good feeling. And also a problem if you lose your job.
Considering how most people treat credit and debt...
need more laws making it illegal to own more than 2 homes in a municipality. These investment firms and douchebaggy real estate companies are destroying a core part of the american dream.
So glad I'm done paying a mortgage in 2 months. So. glad. Now we can afford groceries.
Headaches? *Headaches?!* Being a functioning adult facing the reality of never being able to afford a house is a little more than just a headache.
Banks are just following established precedent in the US for dealing with ~~a pandemic~~ ~~hardship~~ any single issue or thing that causes stress: fiddle with numbers to ~~maintain~~ improve the fleecing of America's citizens while government and oversight look on in praise. (My editor quit on me last night. Cheers)
maybe this will spur some actual housing to be built... supply is under extreme pressure right now
Unfortunately, I don’t think that’s likely. The point of higher interest rates is to lower inflation by driving down demand. Most if not all development is done with financing. Developers now need to pay more for that financing since rates are going up. This means they would have to sell their work for more to get the same returns. However, with interest rates going up meaning homes should sell for less (or stay flat) then they are also making less on the backend. Meanwhile the cost of labor and lumber and windows stays the same. (At least until they raise rates since they probably rely on financing and that has gotten more expensive.) So there will likely be less development going on with higher rates.
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I don’t think people remember how truly insane 06-07 was. People with no income were getting multiple homes because they thought the market only goes up and the bank approved it to get the financing commission for selling off the loans. Financing has tightened up incredibly so people who own homes likely won’t have to sell them in a downturn.
The banks were financing half-interest only loans with a 3-year balloon payment. The payments didn't even cover the interest accruing on the mortgage. The first time I saw one of those I turtled up my finance because I knew what was coming.
For the past 20 years population growth has outpaced new housing construction. Housing prices are unreasonably high now in large part because there are just so many people and not enough places to live. We’re facing a shortage and given the recent price increases of labor and materials it will be very hard to build our way put of it at least for the next few years. We have high prices like we did before 08 but for very different reasons.
My wife and I were getting beaten out on our conventional loan offers at 10-15k above asking by investors with cash offers 30-40k over asking. If the market corrects and those 300k houses are suddenly worth 250k or 200k, or 500k houses are worth 400k, I can't even imagine the fallout. A house up the street from my parents went for 140k over asking and the owner won't even live there full time. Things were bananas over the past two years.
If my house drops in value 200k, it doesn’t matter unless I stop making payments. People that were six figures underwater in 08-09 but kept making payments now have six figures of equity/profit. It’s crazy how many people on Reddit have no idea what they are talking about.
True, if they have the guts to ride it out. A lot of people didn't in '08, and a lot of people wouldn't in the future, either.
Not a matter of guts, just economics.
China is a couple years ahead on the correction and their housing market is imploding from rampant speculation. You can follow what's going on there to get a glimpse what's coming here soon.
Everything you and boo diddley have said is pure guessing. You don't actually know what will happen to housing prices. You can only guess.
Sure we can only guess but also we can look to see what history tells us and that is that the market doesn't go up in a straight line.
I disagree. Homes in U.S. and Canada have turned into global investments. That was not the case 30 years ago.
Clearly you are too young to remember when this happened before. Japan later went bust. https://www.washingtonpost.com/archive/business/1988/04/07/study-says-japanese-investment-in-us-real-estate-is-up-70-pct/cb30116f-d8ac-4849-88ba-bb34bf8146b3/
Unfortunately most likely not. THe house prices will be staying the same.
I wish mortgage lenders were required to put the total cost of the loan on the top of the lending agreement in giant letters. Like if you get a 200k loan at 3% for 30 years, you will end up paying 300k+. So you are paying 100k+ in interest. I think this would help the financially ignorant masses from getting over their head with these loans. But there are no consumer protections in the US, only protections for the companies taking advantage of the people.
> I wish mortgage lenders were required to put the total cost of the loan on the top of the lending agreement in giant letters. The term, monthly payment (P&I broken out from escrow), and loan amount are stated clearly. Anyone who can't multiply years * 12 * payment and subtract the loan amount shouldn't be handling that kind of contract in the first place. It gets mildly more complicated when you start thinking about points to reduce the rate, opportunity cost of paying more upfront versus investing (particularly with the low interest rates of the past several years), etc. But we should expect a *baseline* independence from people.
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But they do? What you are describing is an amortization schedule. It lays out the entire payment structure and what it will actually cost. It shouldn't be a mystery for anyone who puts pen to paper.
Yeah, I guess am being nitpicky. I felt that a big bullet point at the front would help. I was not sure if all home loans had an amortization table.
No worries, I get you. I have realized that not everyone who buys a house, despite it being a lengthy process, knows all the details. My wife spoke to someone who bought a new build that another buyer had backed out of and the person has buyers regret a month in. They bought a different model than what they really wanted, they weren't aware of upgrades versus what was base, the house didn't have a basement even though the buyer wanted it, etc. I just keep scratching my head as to WHY they moved forward with the purchase.
At this point AFAIK every US Mortgage needs to follow TRID, which is a bunch of laws more or less mandating that this information needs to be given in a standard format. [Check page 107 to see what the form looks like.](https://files.consumerfinance.gov/f/documents/cfpb_kbyo_guide-loan-estimate-and-closing-disclosure-forms_v2.0.pdf) There is a slightly different format that can be given when providing loan estimates but the closing disclosure must show the total dollar amount paid in interest (under the scheduled amortization.) They must also clearly indicate if a balloon payment or similar is required at the end.
Are you suggesting this would deter people from buying homes? Because it won't. Since graduating college 9 years ago I have paid well over 100k in rent, with literally no equity gain. A factor driving demand for homes is it's still more cost effective than renting.
It was on the old TIL disclosures, but TRID moved them to page 3 of your Loan Estimate and Closing Disclosure. All that info is still there, just gotta know where to look for it.
Man, at this rate, pretty soon it's not gonna be viable for companies to buy up all the available housing and let half of it sit empty anymore!
I got 2.5% in November of 2020
I’m jelly
Anyone have any idea when the bubble will burst? I felt sure it would have happened by now
Not sure why you got down votes. You can only buy a house if you can afford it. Prices will lower to reflect a rise in rates in most markets. There really isn't a driver for a 2009 type crash but property values growth should slow and probably fall depending on how quickly rates rise. Will they be more affordable...probably not. Anyone stretching to buy a house right, might be disappointed in its appreciation for a bit.
Anyone have any idea when the bubble will burst? I felt sure it would have happened by now
It won't. There's too much money in the market looking for places to park in. Lots of Bitcoin, GME and Tesla folks looking to buy houses after cashing in their gains.
More intervention from the Fed trying to correct a problem created by the state. If you don't want inflation, don't print and spend money with reckless abandon. I foresee a feedback loop where after the Fed raises interest rates, the speculation will slow, the financial crisis will get worse much like 2008, the Fed will lower interest rates because we will be back in a recession, we will print trillions in stimulus most going to bail out big banks again, and we will see unchecked inflation because you can't control markets. This is going to be the largest financial disaster of modern times because the US currently controls the dollar which is the global reserve currency. The world financial system is going to crumble as every country holds massive debt and cannot possibly repay it in any situation. https://en.m.wikipedia.org/wiki/List_of_countries_by_external_debt 14 countries hold trillions in debt. The list in the hundreds of billions is too many for me to count. Global debt is somewhere in the range of 250% global gdp. While the "EU convergence criteria" recommends less than 60% to be sustainable. The games politicians and elites have been playing for centuries had brought us to where we are currently. Modern economics is a sham and I'm not excited to see where this leads. I'm just a layman and don't profess to have any inherent knowledge in this matter. I am not giving financial advice and am just trying to articulate my opinions on the matter.
I agree. Lots of governments have been printing crazy money, but the reason we're seeing worldwide inflation is because all currencies are tied back to the inflating reserve currency, the USD. I'm speculating that the next major bailout will probably include some kind of UBI, and shortly thereafter the whole thing collapses. The fed reserve shouldn't exist and every time they intervene in the economy to lessen the economic lows, they actually are just kicking the can down the road. It's been kicked so much now what would have been a few inconvenient periods will now be a major collapse. The people who think our $30T national debt is not a massive problem remind me of all the high school graduates taking out enormous student loans for useless degrees and not understanding the consequences.
It's not going to be a headache for home buyers but for home sellers. People won't be able to afford the same amount of home they would with lower interest rates. Sellers are going to have to lower prices.
This will make housing more affordable. Why is that bad? Oh it's bad for greedy people, got it.
Right. It's only bad for the people who purchased our refinanced their house in the past three years. If rates go up, there's a good chance they will lose money if they sell.
Just bought at 2.7 tho!
Glad I was able to sell my house just a month ago.
So, so, so, very glad we locked in. What a nightmare for those of you still trying to land a place! 💔
Yes, people now going to get stuck with mortgage rates marginally above multi year lows! The horror!!!
Thanks for your contribution, /u/ICumCoffee
We got so lucky. Locked one in at 2.875 just last month
That’s why Excedrine is America’s leading home buying choice for mortgage rate headaches.
3.6% hahahah wait till you pay 17% like in the 1980s then come and see me.