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Home prices have been rising far faster than inflation. The "people will always desire a home" and "plateau" talk is straight out of the Realtors playbook and i
by bink 4y ago
Home prices have been rising far faster than inflation. The "people will always desire a home" and "plateau" talk is straight out of the Realtors playbook and is said before every pullback.
People have forgotten what a real estate downturn looks like because it's been propped up by the Fed for so long, but in the good old days (before 2004 or so) it wasn't uncommon to go through periods where the average house took 9-12 months to sell and sellers went through 3-4 Realtors before it sold. Do the Realtors still say that 6 months is the average time to sell or have they forgotten that too?
The fact is that people buy homes based on monthly payment and significant rate hikes are something we haven't seen in decades. When the monthly payment doubles housing prices go down.
- deleted 4y ago[deleted]
- nilkn 4y agoMonthly payments haven't doubled. Here's an example. Imagine a $500k house in Texas with a 2% property tax rate and $2k/year in home insurance. Suppose a hypothetical buyer is putting 20% down. At a 3% mortgage interest rate, the monthly PITI payment would be $2686. At a 6% mortgage interest rate, the monthly PITI payment would be $3398. That's a substantial increase, to be sure, but if payments had doubled then it would cost $5372, not $3398. How high would mortgage interest rates need to be for the payment to actually double? Answer: about 12.8%. So interest rates would need to more than double from where they are today to see actual housing payments double.