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The mortgage rate before the 2008 crisis was floating around 6.5%. The mortgage rate in 2020 dropped all the way below 2.75%. https://fred.stlouisfed.org/graph/
by yCombLinks 5y ago
The mortgage rate before the 2008 crisis was floating around 6.5%. The mortgage rate in 2020 dropped all the way below 2.75%. https://fred.stlouisfed.org/graph/?g=NUh https://fred.stlouisfed.org/graph/?g=NUh
A mortgage rate of 6.5% has a monthly payment of $1977 if a house is $300k with a 20% down payment. Most people make their financial decisions based on short term ability to pay. At 2.75% that same $1977 will pay a monthly mortgage on a 410,000 house (assuming a 20% down payment) https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment https://www.nerdwallet.com/mortgages/mortgage-calculator/cal... . People are willing to pay more because they can afford more per month, and outbid people that will not match those prices.
- yCombLinks 5y agoThere is also the fact that investors can get a higher rate of return by buying and managing a rental property rather than selling a mortgage, so that money is also competing to own the property. I personally feel we are in a bubble, that will pop less explosively than the 2008 bubble.