6 ms·

Got my mortgage at 2.75% late last year. Woooooo.....

by jcadam 5y ago

seizethecheese 5y ago
What do you think is going to happen to your home price is interest rates go up to 5% and then people can’t afford huge mortgages anymore?
- solveit 5y ago
  Shouldn't be too relevant if they're planning on living in the house for the next ~30 years.
  - xienze 5y ago
    Everybody “plans” on living in the same house forever. Unfortunately, life gets in the way. Job change, moving for a different school district, divorce, death, etc. Stuff happens.
- jcadam 5y ago
  We'll see. we didn't have inflation like this during the last big downturn in 2008. I also don't think the Fed is going to be able to raise rates as high as they did back in the early 80s.
  - nostromo 5y ago
    The economy would collapse, along with the US government, at even moderately-high interest rates. The federal government is $30t in debt. Even a small rise in interest rates would quickly make the entire federal budget servicing the debt.
    - odonnellryan 5y ago
      That's not true.
      - MisterMower 5y ago
        And what makes you think that?
      - hackerfromthefu 5y ago
        Please elaborate
        odonnellryan 5y ago
        Because interest rates don't immediately go up. Because the government has ways to ensure that they do not have to pay too much to service the debt. Because the government doesn't have to issue new debt to pay the old debt. Etc.. etc.. etc..
        hackerfromthefu 5y ago
        I don't understand these, let's look at them one at a time. 1) >> Interest rates don't immediately go up. But the ops question is what if rates did go up (wouldn't it be unaffordable for the government). So your answer seems to be a different scenario to the one discussed? What am I missing? 2) >> Because the government has ways to ensure that they do not have to pay too much to service the debt. What ways, specifically? There's just not enough information to be able to make sense of the answer? 3) >> Because the government doesn't have to issue new debt to pay the old debt. Can you explain how this works? If they don't issue new debt, where does the money come from the pay the old debt? It's not like they are going to suddenly come into massive surplus by reducing all other spending is it? 4) >> Etc.. etc.. etc.. I'm seriously thinking about this question, if there's any real reasons, very interested to hear?
        odonnellryan 5y ago
        Just look at these charts: https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DGS10 I admit I'm not an expert here - but unless someone comes to be with a really good argument why the US Government is on verge of collapse b/c of raising rates (they are the ones why raise rates!!!) I am not sure how much I need to prove the counterpoint?
  - nwmcsween 5y ago
    We currently have runaway inflation, if you look at how inflation was calculated in 1980s compared to now it would be between 12-16%.
    - jcadam 5y ago
      Don't worry, when inflation really gets out of control the Fed will step in with a new currency (CBDC) and save us.
  - adam_arthur 5y ago
    The inflation in the 2000s was the needle that popped the housing bubble. It wasn't comparable to current levels, but it was high and the Fed tightened aggressively to fight it. There were a lot of structural problems as well, but rising rates leading to foreclosures set off the chain of events.
- deleted 5y ago
  [deleted]
- jyu 5y ago
  Prices will stay the same, but days on market increases. Inflation works itself through the system and eventually there will be a buyer.
- odonnellryan 5y ago
  Probably not much. The only time the US had a major home price adjustment was 2008 and that was because the housing market was the problem. Currently the housing market is up but not a problem. There aren't crazy foreclosures and there aren't any expected. Tho that can change if we have a big recession absolutely. Also home prices did not take a very long time to recover all things considered.
  - listenallyall 5y ago
    It's always different this time, until it's not. Foreclosure rates aren't high today, but the people who bought extremely expensive houses did so just this year and last. Demand for homes is very high, in large part because hedge funds are buying lots of them... if rates rise, or if prices stabilize, they will pull out, decreasing demand significantly. And will migration to smaller cities/towns continue unabated, (if you haven't moved to Austin/Vegas/Idaho/Montana yet, when do you plan to??) or will that reverse as companies want a physical presence again? I will agree that last time, the recovery was speedier than anticipated, which only shows that irresponsible economic policy to avoid "economy will crash!!!" is overblown.
    - jcadam 5y ago
      > And will migration to smaller cities/towns continue unabated, (if you haven't moved to Austin/Vegas/Idaho/Montana yet, when do you plan to??) or will that reverse as companies want a physical presence again? Moved to Alaska last year. Not going back to city life - remote forever :)
      - listenallyall 5y ago
        That's my point... you already moved. Will the same number of people migrate to Alaska in 2023 as moved in 2021?
        jcadam 5y ago
        No. In fact, Alaska doesn't have much net migration, not even the last 2 years. There's quite a lot of churn - people move up here, go through their first Alaskan winter, then move back to the lower 48.
- rufus_foreman 5y ago
  Ben Carlson's economics blog has a post on what happened to housing prices in the past during periods of rising interest rates: https://awealthofcommonsense.com/2022/01/will-higher-mortgage-rates-derail-the-housing-market/ https://awealthofcommonsense.com/2022/01/will-higher-mortgag.... Short answer, home prices go up: "In fact, every prolonged rising rate environment I could find over the past 50 years saw housing prices grow when mortgage rates went up". From his chart, when mortgage rates went from 3.6% to 5% from 2015 to 2018, house prices rose 22.4%. So, what do you think is going to happen to home prices when interest rates go up to 5%?
novateg 5y ago
Got mine at 2.25% in 2020. I'm saving $500k for 360 months with the rate i got
- deleted 5y ago
  [deleted]

Got my mortgage at 2.75% late last year. Woooooo.....

by jcadam 5y ago

Got my mortgage at 2.75% late last year. Woooooo.....

What do you think is going to happen to your home price is interest rates go up to 5% and then people can’t afford huge mortgages anymore?

solveit 5y ago
Shouldn't be too relevant if they're planning on living in the house for the next ~30 years.
- xienze 5y ago
  Everybody “plans” on living in the same house forever. Unfortunately, life gets in the way. Job change, moving for a different school district, divorce, death, etc. Stuff happens.
jcadam 5y ago
We'll see. we didn't have inflation like this during the last big downturn in 2008. I also don't think the Fed is going to be able to raise rates as high as they did back in the early 80s.
- nostromo 5y ago
  The economy would collapse, along with the US government, at even moderately-high interest rates. The federal government is $30t in debt. Even a small rise in interest rates would quickly make the entire federal budget servicing the debt.
  - odonnellryan 5y ago
    That's not true.
    - MisterMower 5y ago
      And what makes you think that?
    - hackerfromthefu 5y ago
      Please elaborate
      - odonnellryan 5y ago
        Because interest rates don't immediately go up. Because the government has ways to ensure that they do not have to pay too much to service the debt. Because the government doesn't have to issue new debt to pay the old debt. Etc.. etc.. etc..
        hackerfromthefu 5y ago
        I don't understand these, let's look at them one at a time. 1) >> Interest rates don't immediately go up. But the ops question is what if rates did go up (wouldn't it be unaffordable for the government). So your answer seems to be a different scenario to the one discussed? What am I missing? 2) >> Because the government has ways to ensure that they do not have to pay too much to service the debt. What ways, specifically? There's just not enough information to be able to make sense of the answer? 3) >> Because the government doesn't have to issue new debt to pay the old debt. Can you explain how this works? If they don't issue new debt, where does the money come from the pay the old debt? It's not like they are going to suddenly come into massive surplus by reducing all other spending is it? 4) >> Etc.. etc.. etc.. I'm seriously thinking about this question, if there's any real reasons, very interested to hear?
        odonnellryan 5y ago
        Just look at these charts: https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DGS10 I admit I'm not an expert here - but unless someone comes to be with a really good argument why the US Government is on verge of collapse b/c of raising rates (they are the ones why raise rates!!!) I am not sure how much I need to prove the counterpoint?
- nwmcsween 5y ago
  We currently have runaway inflation, if you look at how inflation was calculated in 1980s compared to now it would be between 12-16%.
  - jcadam 5y ago
    Don't worry, when inflation really gets out of control the Fed will step in with a new currency (CBDC) and save us.
- adam_arthur 5y ago
  The inflation in the 2000s was the needle that popped the housing bubble. It wasn't comparable to current levels, but it was high and the Fed tightened aggressively to fight it. There were a lot of structural problems as well, but rising rates leading to foreclosures set off the chain of events.
deleted 5y ago
[deleted]
jyu 5y ago
Prices will stay the same, but days on market increases. Inflation works itself through the system and eventually there will be a buyer.
odonnellryan 5y ago
Probably not much. The only time the US had a major home price adjustment was 2008 and that was because the housing market was the problem. Currently the housing market is up but not a problem. There aren't crazy foreclosures and there aren't any expected. Tho that can change if we have a big recession absolutely. Also home prices did not take a very long time to recover all things considered.
- listenallyall 5y ago
  It's always different this time, until it's not. Foreclosure rates aren't high today, but the people who bought extremely expensive houses did so just this year and last. Demand for homes is very high, in large part because hedge funds are buying lots of them... if rates rise, or if prices stabilize, they will pull out, decreasing demand significantly. And will migration to smaller cities/towns continue unabated, (if you haven't moved to Austin/Vegas/Idaho/Montana yet, when do you plan to??) or will that reverse as companies want a physical presence again? I will agree that last time, the recovery was speedier than anticipated, which only shows that irresponsible economic policy to avoid "economy will crash!!!" is overblown.
  - jcadam 5y ago
    > And will migration to smaller cities/towns continue unabated, (if you haven't moved to Austin/Vegas/Idaho/Montana yet, when do you plan to??) or will that reverse as companies want a physical presence again? Moved to Alaska last year. Not going back to city life - remote forever :)
    - listenallyall 5y ago
      That's my point... you already moved. Will the same number of people migrate to Alaska in 2023 as moved in 2021?
      - jcadam 5y ago
        No. In fact, Alaska doesn't have much net migration, not even the last 2 years. There's quite a lot of churn - people move up here, go through their first Alaskan winter, then move back to the lower 48.
rufus_foreman 5y ago
Ben Carlson's economics blog has a post on what happened to housing prices in the past during periods of rising interest rates: https://awealthofcommonsense.com/2022/01/will-higher-mortgage-rates-derail-the-housing-market/ https://awealthofcommonsense.com/2022/01/will-higher-mortgag.... Short answer, home prices go up: "In fact, every prolonged rising rate environment I could find over the past 50 years saw housing prices grow when mortgage rates went up". From his chart, when mortgage rates went from 3.6% to 5% from 2015 to 2018, house prices rose 22.4%. So, what do you think is going to happen to home prices when interest rates go up to 5%?

novateg 5y ago

Got mine at 2.25% in 2020. I'm saving $500k for 360 months with the rate i got

deleted 5y ago
[deleted]