6 ms·

> Bonds will be wrecked, stocks will be wrecked, cash is wrecked, even gold What will happen to the housing market?

by throwaway_1928 4y ago

don_neufeld 4y ago
Expect a steep drop. Leverage is much more expensive (from sub 3% mortgages, we already have 5%+ rates), which means buyers can afford less, plus significant withdrawal of “cash” buyers from the market who were really just borrowing against their (now much smaller) equity positions. I wouldn’t want to be in a forced sale position anytime soon.
- tempsy 4y ago
  5% for a 30 year mortgage is not really that high historically speaking. The problem is more that prices are very high and supply remains very low.
zhdc1 4y ago
Anything from nothing to a small correction. Mortgage payments set a ceiling on how high property prices can rise. However, people seem to be willing to spend more on mortgage payments than they probably should, so it’s likely that this ceiling hadn’t been reached yet. The other factor is simple supply and demand. A large factor in 2008 was a large inventory of housing that came on the market. As far as I’m aware, there is no current corollary in the US now.
- toomuchtodo 4y ago
  I would like to qualify this. This is true in markets where labor is the majority purchasers. In markets like the sunbelt, where retirees are moving and buying properties with a combination of cash, previous real estate equity, and retirement assets, mortgage payments don’t restrict home prices. This crowds out anyone who does need financing to buy their home, especially as interest rates rise and inventory remains low.
nemo44x 4y ago
It’s all a function of interest rates. We are seeing prices stabilize now after a couple years of meteoric rises. If interest rates really climb for an extended time then home values will fall.
riku_iki 4y ago
People who bought houses will be fine, since they secured low interest loans, and will hesitate to sell because won't get good interest on next loan. This will cause low supply -> high prices -> people who didn't buy are very screwed: they will face high prices together with high interest.
- rhexs 4y ago
  It depends on a recession and how bad it is. Even if you're locked into a low mortgage, if you lose your job, can't pay, and due to rising interest rates are now underwater 500K on a mortgage, nothing good happens. Like it or not there's a lot of chaff to cut in software engineering. How many of these SaaS businesses can survive, and how many engineers bought nice homes with massive salaries that might go poof?
  - riku_iki 4y ago
    > are now underwater 500K on a mortgage it will be very small fraction of homeowners: those who bought in in last 2-3 years. All others will be significantly over water, and may take equity loans instead of selling houses to preserve low mortgage interest rates.
    - tsunamifury 4y ago
      Eventually and all sellers and no buyers market will catch up with prices. Matter of how long it can be bridged. Every equity loan taken out against higher values will shorten that bridge.
      - riku_iki 4y ago
        And then homeowner will have strong incentive to move to smaller rental unit and rent his primary residence, or maybe he will be able to find job in this few years secured by equity loan. > Eventually Eventually maybe. FED gave 20T free money to current home owners in addition to existing tax incentives, how long it will take to chew through them? Maybe generation?
ItsMonkk 4y ago
The value of the house goes up. The value of the land gets wrecked. If you are living in SF, this is bad. If you are living in the middle of nowhere, this is good for you.

> Bonds will be wrecked, stocks will be wrecked, cash is wrecked, even gold What will happen to the housing market?

Expect a steep drop. Leverage is much more expensive (from sub 3% mortgages, we already have 5%+ rates), which means buyers can afford less, plus significant withdrawal of “cash” buyers from the market who were really just borrowing against their (now much smaller) equity positions. I wouldn’t want to be in a forced sale position anytime soon.

tempsy 4y ago
5% for a 30 year mortgage is not really that high historically speaking. The problem is more that prices are very high and supply remains very low.

zhdc1 4y ago

Anything from nothing to a small correction. Mortgage payments set a ceiling on how high property prices can rise. However, people seem to be willing to spend more on mortgage payments than they probably should, so it’s likely that this ceiling hadn’t been reached yet. The other factor is simple supply and demand. A large factor in 2008 was a large inventory of housing that came on the market. As far as I’m aware, there is no current corollary in the US now.

toomuchtodo 4y ago
I would like to qualify this. This is true in markets where labor is the majority purchasers. In markets like the sunbelt, where retirees are moving and buying properties with a combination of cash, previous real estate equity, and retirement assets, mortgage payments don’t restrict home prices. This crowds out anyone who does need financing to buy their home, especially as interest rates rise and inventory remains low.

nemo44x 4y ago

It’s all a function of interest rates. We are seeing prices stabilize now after a couple years of meteoric rises. If interest rates really climb for an extended time then home values will fall.

riku_iki 4y ago

People who bought houses will be fine, since they secured low interest loans, and will hesitate to sell because won't get good interest on next loan. This will cause low supply -> high prices -> people who didn't buy are very screwed: they will face high prices together with high interest.

rhexs 4y ago
It depends on a recession and how bad it is. Even if you're locked into a low mortgage, if you lose your job, can't pay, and due to rising interest rates are now underwater 500K on a mortgage, nothing good happens. Like it or not there's a lot of chaff to cut in software engineering. How many of these SaaS businesses can survive, and how many engineers bought nice homes with massive salaries that might go poof?
- riku_iki 4y ago
  > are now underwater 500K on a mortgage it will be very small fraction of homeowners: those who bought in in last 2-3 years. All others will be significantly over water, and may take equity loans instead of selling houses to preserve low mortgage interest rates.
  - tsunamifury 4y ago
    Eventually and all sellers and no buyers market will catch up with prices. Matter of how long it can be bridged. Every equity loan taken out against higher values will shorten that bridge.
    - riku_iki 4y ago
      And then homeowner will have strong incentive to move to smaller rental unit and rent his primary residence, or maybe he will be able to find job in this few years secured by equity loan. > Eventually Eventually maybe. FED gave 20T free money to current home owners in addition to existing tax incentives, how long it will take to chew through them? Maybe generation?

ItsMonkk 4y ago

The value of the house goes up. The value of the land gets wrecked. If you are living in SF, this is bad. If you are living in the middle of nowhere, this is good for you.